After a year of operations, Rolling Acres Winery (Rolling Acres) is taking a closer look at its figures. It has a unique business model that allows clients to design their ideal blend, and then Rolling Acres bottles and ships the customers’ desired quantity.

In 20X8, an order was placed for 1,000 bottles of a specific custom blend. It was intended for use in a chain of restaurants, which subsequently went bankrupt.

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The order incurred the following variable costs per bottle:

• DM: $5.00

• DL: $2.00

• variable manufacturing OH: $1.75

• sales commission: $0.50

Additionally, Rolling Acres has allocated the following fixed expenses to the order:

• total fixed manufacturing OH expenses: $3,000

• total fixed selling and administrative expenses: $2,200

By period end, 800 of the bottles had been sold for $35 a piece. The grape blend on the cancelled order is a popular one and Rolling Acres expects to sell those bottles in the near future to different clients. There was no beginning inventory.


Calculate the total cost per bottle and prepare an income statement for the 800 bottles sold in proper form under both variable and absorption costing for the year ended December 31, 20X8.


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