Adams Company Predicted Factory Overhead for Year 2 and Year

question 57

Multiple Choice

Adams Company predicted factory overhead for Year 2 and Year 3 would be $120,000 for each year. The predicted activity for Year 2 and Year 3 would be 30,000 and 20,000 direct labour hours, respectively. Additional data are as follows:
$\begin{array}{lcc}&\underline{\text { Year } 1} & \underline{\text { Year } 2}\\\text { Sales in units } & 25,000 & 25,000 \\\text { Selling price per unit } & \$ 20 & \$ 20 \\\text { Direct materials and direct labour per unit } & \$ 10 & \$ 10\end{array}$ The company assumes that the long-run normal production level is 20,000 direct labour hours per year.The actual factory overhead cost for the end of Year 1 and Year 2 was $120,000.Assume that it takes one direct labour hour to make one finished unit.
-Refer to the figure.When the normal factory overhead rate is used,what are the gross profits for Year 2 and Year 3,respectively?

• A)$80,000 and $80,000
• B)$100,000 and $100,000
• C)$120,000 and $140,000
• D)$200,000 and $200,000

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Definitions:

Lampreys

Jawless fish known for their distinctive, toothed, funnel-like sucking mouth, often considered parasites or predatory on other fish.

Jawless Fish

A group of vertebrates known for lacking jaws, including lampreys and hagfish, representing the earliest fish in the evolutionary history.

Bones

The rigid organs that constitute part of the endoskeleton of vertebrates, providing support and protection and enabling movement.

Fins

External appendages on fishes and some other aquatic animals, used primarily for movement, steering, and balance in water.