Rainbow Company Manufactures Paint in Two Processes: Mixing and Cooking

question 104

Multiple Choice

Rainbow Company manufactures paint in two processes: Mixing and Cooking. Total costs incurred in the mixing and cooking departments are as follows: $$\begin{array} { l l l } & \text { Direct Materials } & \begin{array} { l } \text { Direct } \\\text { Labor }\end{array} \\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Cooking } & \$ 25,000 & \$ 50,000\end{array}$$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Cooking department. Rainbow Company manufactures two products, Superior Paint and Deluxe Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Cooking }\\&DM&DL&DM&DL\\\text { Superior } & \mathbf{6 0} \% & \mathbf{5 0} \% & \mathbf{5 0} \% & \mathbf{4 0} \% \\\text { Deluxe } & \mathbf{4 0} \% & \mathbf{5 0} \% & \mathbf{5 0} \% & \mathbf{6 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Cooking department cost allocated to Deluxe is:

• A) $104,500
• B) $12,500
• C) $32,500
• D) $150,500

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Definitions:

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A designation for a type of nonprofit organization in the United States exempt from federal income tax, which promotes social welfare.

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The total amount of income generated by the sale of goods or services related to a company's primary operations.

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