Azure Company Predicted Factory Overhead for 2018 and 2019 Would

question 174

Multiple Choice

Azure Company predicted factory overhead for 2018 and 2019 would be $150,000 for each year. Direct labor hours were predicted as 35,000 hours for 2018 and 25,000 hours for 2019. Additional data are as follows: $\begin{array}{lcc}&2018&2019\\\text { Sales in units } & 40,000 & 40,000 \\\text { Selling price per unit } & \$ 30 & \$ 30 \\\text { Direct materials and direct labor per unit } & \$ 15 & \$ 15\end{array}$ The company assumes that the long-run normal production level is 25,000 direct labor hours per year. The actual factory overhead cost for the end of 2018 and 2019 was $150,000. Assume that it takes one direct labor hour to make one finished unit.
When the normal factory overhead rate is used, the gross profits for 2018 and 2019, respectively, are

• A)$320,000 and $320,000, respectively.
• B)$720,000 and $720,000, respectively.
• C)$400,000 and $400,000, respectively.
• D)$360,000 and $360,000, respectively.

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Definitions:

Nominal Scale

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Variables

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A statistical method used to predict the value of a dependent variable based on one or more independent variables.

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