Cara Company Has the Following Information Pertaining to Its Two

question 41

Multiple Choice

Cara Company has the following information pertaining to its two divisions for the current year:
Common expenses are $18,000 for the current year.
$\begin{array}{lrr}&\text { European } & \text { American } \\&\text { Division } & \text { Division }\\\text { Variable selling and administrative expenses } & \$ 40,000 & \$ 55,000 \\\text { Direct fixed manufacturing expenses } & 22,000 & 60,000 \\\text { Sales } & 120,000 & 220,000 \\\text { Direct fixed selling and administrative expenses } & 18,000 & 45,000 \\\text { Variable manufacturing expenses } & 25,000 & 55,000\end{array}$
-Refer to the Figure.What is the net income for Cara Company?

• A)$2,000
• B)$32,500
• C)$150,000
• D)$300,000

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Definitions:

Direct Labor Hours

The total hours worked by employees that can be directly associated with the production of goods or services.

Single Plantwide Overhead Rate

A cost allocation method that applies the same overhead rate to all products, regardless of the department where they were produced or the amount of overhead they actually incurred.

Machine Hours

A metric used to allocate manufacturing overhead costs to individual products based on the number of hours the machines are run to produce them.

Fabrication Department

A division or unit within a manufacturing firm dedicated to the assembly or production of goods, where raw materials are transformed into finished products.