Figure 4-1 Adams Company Predicted Factory Overhead for 2010 and 2011

question 87

Multiple Choice

Figure 4-1 Adams Company predicted factory overhead for 2010 and 2011 would be $120,000 for each year.The predicted activity for 2010 and 2011 were 30,000 and 20,000 direct labor hours, respectively.Additional data are as follows:
The company assumes that the long-run normal production level is 20,000 direct labor hours per year.The actual factory overhead cost for the end of 2009 and 2010 was $120,000.Assume that it takes one direct labor hour to make one finished unit.
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Refer to Figure 4-1.When the normal factory overhead rate is used, the gross profits for 2010 and 2011, respectively, are

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

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Definitions:

Corrective Action

Measures taken to identify, eliminate, and prevent the recurrence of a problem within a process or system.

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The roles and activities that managers perform to plan, organize, lead, and control to achieve organizational objectives.

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Part of a manager's duties that involve collecting, processing, and disseminating information within the organization.

Henry Mintzberg

A renowned academic and author known for his work on business and management structures, strategies, and organizational forms.