Operating Income Calculation for Olive Corporation Divisions

What are the costs associated with Olive Corporation's two divisions, Pressing and Extracting?

The company's primary product is Lavender Oil. Each division has its own set of variable and fixed costs per barrel of oil.

Costs associated with Extracting Division:

Variable costs per barrel of oil: $9

Fixed costs per barrel of oil: $6

Costs associated with Pressing Division:

Variable costs per barrel of oil: $28

Fixed costs per barrel of oil: $32

Reflecting on the costs associated with Olive Corporation's two divisions, Pressing and Extracting, it is evident that each division incurs both variable and fixed costs in the production of Lavender Oil. The Extracting Division has a lower cost structure compared to the Pressing Division, with variable costs per barrel of oil at $9 and fixed costs per barrel of oil at $6.

On the other hand, the Pressing Division has higher costs per barrel of oil, with variable costs at $28 and fixed costs at $32. Despite the higher costs, the Pressing Division sells the 200 barrels at a price of $150 each to customers.

Given the costs associated with each division, it is important to calculate the operating income of both divisions together to determine the overall financial performance of Olive Corporation.