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Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut...

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Accounting

Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has identified two activity pools, the related costs per pool, the cost driver for each pool, and the expected usage for each pool.

Activity Total Activity Cost Cost Driver Standard Extra Virgin
Washing, Pressing & Filtering (WPF) $ 1,929,950 Washing, Pressing, and Filtering hours 48,800 hours 110,700 hours
Bottling $ 1,267,500 Number of bottles 338,000 bottles 84,500 bottles

Additional information about each grade of olive oil is as follows:

Grade Sales Revenue Direct Materials Costs Direct Labor Costs
Standard $ 5,195,000 $ 900,000 $ 375,000
Extra Virgin $ 3,050,000 $ 600,000 $ 150,000

Required:

  1. Calculate the activity rate for each activity 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.

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