Question

In: Accounting

In its first year of business, Ollie’s Olive Oil produced 104,000 quarts of olive oil. During...

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?

Solutions

Expert Solution

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...


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