07 Feb Bennie’s Olive Oil began business in 2018, during
Bennie’s Olive Oil began business in 2018, during which 120,000 quarts of olive oil were produced. Costs incurred during the year were as follows:Ingredients used $240,000Direct labor 120,000Variable mfg. overhead 200,000Fixed mfg. overhead 100,000Variable selling expenses 55,000Fixed selling and administrative expenses 40,000Total actual costs $755,000The company sells each quart of olive oil for $15.00. 110,000 quarts were sold.Required: Compute the unit product cost using absorption costing, and variable costing. Prepare an income statement using variable costing. Prepare an income statement using absorption costing. Samson Inc. prepared a budget last period that called for sales of 20,000 units at a price of $15 each. The costs per unit were estimated to amount to $7 variable and $4 fixed. During the period, production was equal to actual sales of 17,000 units. The selling price was $13.75 per unit. Variable costs were $6.85 per unit. Fixed costs actually incurred were $85,000.Required: Prepare a report to show the difference between the actual contribution margin per the static budget and the budgeted contribution margin per the flexible budget. Explain the significance of the comparisons. The Beacon Company has the capacity to produce 5,000 units per year. Its predicted operations for the year are as follows:Sales (4,000 units @ $20 each) $80,000Manufacturing costs:Variable $5 per unitFixed $10,000Marketing and administrative costs:Variable $1 per unitFixed $8,000The accounting department has prepared the following projected income statement for the coming year for your use in making decisions.Sales $80,000Variable costs:Manufacturing ($5 x 4,000) $20,000Marketing ($1 x 4,000) 4,000 24,000Contribution margin $56,000Fixed costs:Manufacturing $10,000Marketing 8,000 18,000Operating profit $38,000Required Should the company accept a special order for 500 units at a selling price of $9? Assuming that there are no variable marketing and administrative costs for this order and that regular sales will not be affected, what is the impact of this decision on company profits? Suppose there was a one-time setup fee of $1,000 for the preceding order. Should the special order be accepted? Why? What other factors should be considered and how would they impact your decision to accept the special order? Bam Corporation manufactures and sells oil filters. The selling price for these oil filters is $5.00, which is what Bam’s competitors charge, as the oil filter is a commodity. Facts for Bam are as follows: Bam desires a 15 percent return on its total assets, which are $2,000,000. Bam has a current sales volume of 500,000 units. Variable costs are $2.50 per unit, $2.00 for manufacturing and $.50 for marketing and administrative costs. Fixed costs are $600,000.Required: Can Bam achieve its desired profit? Suppose that Bam follows a strategy of one of its competitors, which is to spend $100,000 on advertising so that there is more brand awareness. This would permit them to raise the selling price to $6.00 but their sales volume would decrease to 450,000 units. Will
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