In: Accounting
In its first year of business, Ollie’s Olive Oil produced
104,000 quarts of olive oil. During its first year, the company
sold 100,000 quarts of olive oil. Costs incurred during the year
were as follows:
Ingredients used | $228,800 |
Direct labor | 104,000 |
Variable overhead | 197,600 |
Fixed overhead | 98,800 |
Variable selling expenses | 50,000 |
Fixed selling and administrative expenses | 20,000 |
Total actual costs | $699,200 |
a.
1. What was the actual production cost per quart under variable
costing?
2. What was the actual production cost per quart under absorption
costing?
b. What was variable cost of goods sold for the year under
variable costing?
c. What was cost of goods sold for the year under
absorption costing?
d.
1. What was the value of ending inventory under variable
costing?
2. What was the value of ending inventory under absorption
costing?
e.
1. How much fixed overhead was charged to expense for the year
under variable costing?
2. How much fixed overhead was charged to expense for the year
under absorption costing?
a1. Actual Production cost per quart under variable costing
Particulars | $ |
Ingredients used | 228,800 |
Direct Labor | 104,000 |
Variable Overhead | 197,600 |
Actual Production Cost | 530,400 |
a1. Actual Production cost per quart under absorption costing
Particulars | $ |
Ingredients used | 228,800 |
Direct Labor | 104,000 |
Variable Overhead | 197,600 |
Fixed Overhead | 98,800 |
Actual Production Cost | 629,200 |
b. Variable cost of goods sold under variable costing
Unit Product cost = $530,400 / 104,000 units = $5.10 per unit
Cost of goods sold = 100,000 units * $5.10 per unit = $510,000
c. Cost of goods sold under absorption costing
Unit Product cost = $629,200 / 104,000 units = $6.05 per unit
Cost of goods sold = 100,000 units * $6.05 per unit = $605,000
d1. Value of ending inventory under variable costing
Ending inventory = 104,000 - 100,000 = 4,000 units
Unit Product cost = $530,400 / 104,000 units = $5.10 per unit
Value of ending inventory = 4,000 units * $5.10 per unit = $20,400
d2. Value of ending inventory under absorption costing
Ending inventory = 104,000 - 100,000 = 4,000 units
Unit Product cost = $629,200 / 104,000 units = $6.05 per unit
Value of ending inventory = 4,000 units * $6.05 per unit = $24,200
e1. Fixed overhead charged under variable costing
Fixed overhead charged = $98,800
e2. Fixed overhead charged under absorption costing
Fixed overhead per unit = $98,800 / 104,000 units = $0.95 per unit
Fixed overhead charged = 100,000 * $0.95 per unit = $95,000
All the best...