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The Rainbow Company Manufactures Paint in Two Processes: Mixing and Heating

question 78

Multiple Choice

The Rainbow Company manufactures paint in two processes: Mixing and Heating. Total costs incurred in the Mixing and Heating departments are as follows: $\begin{array}{lll}&\text { Direct Materials }&\text { Direct labor }\\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Heating } & \$ 25,000 & \$ 50,000\end{array}$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Heating department. Rainbow Company manufactures two products, Fantastic Paint and Super Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Heating }\\&DM&DL&DM&DL\\\text { Fantastic } & \mathbf{5 0} \% & \mathbf{8 0} \% & \mathbf{4 0} \% & \mathbf{8 0} \% \\\text { Super } & \mathbf{5 0} \% & \mathbf{2 0} \% & \mathbf{6 0} \% & \mathbf{2 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Mixing department cost allocated to Fantastic is:

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Definitions:

Taxable Income

The amount of an individual's or corporation's income used to determine how much tax is owed to the government in a given tax year.

Schedule L

Schedule L is a tax form used by certain businesses to report their balance sheet details to the IRS, including assets, liabilities, and equity.

Schedule M-1

A form used by corporations filing U.S. federal corporate income taxes to reconcile financial statement income with tax return income.

Total Receipts

The total amount of money received by a business during a specific period, including sales, income, donations, and other forms of revenue.