Question

Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has identified two activity cost pools, the related costs per pool, the cost driver for each pool, and the expected usage for each pool. Total Activity Activity Cost Cost Driver Standard Extra Virgin Washing, Pressing & Filtering (WPF) $1,673,150 Washing, Pressing, and Filtering hours 46,400 hours 107,100 hours Bottling $ 706,500 Number of bottles 314,000 bottles 78,500 bottles Additional information about each grade of olive oil is as follows: Grade Standard Extra Virgin Sales Revenue $5,135,000 $2,450,000 Direct Materials Costs $900,000 $600,000 Direct Labor Costs $375,000 $150,000 Required: 1. Calculate the activity rate for each cost pool. 2. Using the activity rates, determine the total amount of overhead assigned to each product. 3. Determine total manufacturing cost for each product. 4. Calculate the gross profit for each product Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the activity rate for each cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Washing. Pressing & Filtering (WPF) Bottling per hour per bottle Rond Required 2 >

Answer 1

1)
Activity	Total Activity cost (A)	Total Cost driver (B)	Activity rates (A / B )
Washing, pressing & Filtering (WPF)	$1,673,150	153,500 hours ( 46,400 + 107,100)	$ 10.90	per hour
Bottling	$ 706,500	392,500 bottles ( 314,000 + 78,500 )	$ 1.80	per bottle

2)
		Standard		Extra Virgin
	Activity rate (A)	Activity rate for Standard (B)	Overhead assigned to Standard (A x B )	Activity rate for Extra Virgin (C )	Overhead assigned to Extra Virgin (A x C )
Washing, pressing & Filtering (WPF)	$ 10.90	46,400	$ 505,760	107,100	$ 1,167,390
Bottling	$ 1.80	314,000	$ 565,200	78,500	$ 141,300
Total amount of Overhead assigned			$ 1,070,960		$ 1,308,690

3)
	Standard	Extra Virgin
Direct materials cost	$ 900,000	$ 600,000
Direct Labor Cost	$ 375,000	$ 150,000
Overhead cost allocated	$ 1,070,960	$ 1,308,690
Total Manufacturing Cost	$ 2,345,960	$ 2,058,690

4)
	Standard	Extra Virgin
Revenue	$ 5,135,000	$ 2,450,000
Cost of goods sold	($ 2,345,960)	($ 2,058,690)
Gross Profit	$ 2,789,040	$ 391,310