Roberto and Reagan Are Both 25-Percent Owner/managers for Bright Light

question 53

Multiple Choice

Roberto and Reagan are both 25-percent owner/managers for Bright Light Incorporated. Roberto runs the retail store in Sacramento, California, and Reagan runs the retail store in San Francisco, California. Bright Light generated a $126,050 profit companywide made up of a $75,300 profit from the Sacramento store, a ($25,750) loss from the San Francisco store, and a combined $76,500 profit from the remaining stores. If Bright Light is taxed as a partnership and it is decided that both Roberto and Reagan will be allocated 70 percent of his own store's profit, with the remaining profits allocated pro rata among all the owners, how much income will be allocated to Reagan in total?

• A)($25,052.50).
• B)($18,025.00).
• C)$4,816.25.
• D)$20,236.25.

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Definitions:

Overapplied

In cost accounting, this refers to a situation where the allocated overhead costs exceed the actual overhead costs incurred.

Variable Overhead Rate

The per-unit cost of overhead that changes with the level of production or activity.

Efficiency Variances

The differences between actual costs and the standard or budgeted costs based on the efficient use of resources.

Fixed Manufacturing Overhead Budget

A predetermined estimate of the total fixed costs required to support production activities, excluding variable costs directly tied to production volume.