Question - Truthful Reporting produces two products. "A" and "B".
The consumption of labor and materials, production units, and sales for the year are represented in the following table:
|
Product A
|
Product B
|
|
DL (hours/unit)
|
3
|
10
|
|
DM (lbs/unit)
|
20
|
10
|
|
Units Produced
|
50
|
70
|
|
Units Sold
|
40
|
35
|
|
Sale Price
|
$250
|
$300
|
The company also incurred $3,400 of fixed manufacturing overhead to produce the two products. The company pays a wage rate of $15/hour and pays $5/lb of material. It is company policy to allocate fixed overhead on the basis of lbs of direct material. The company uses actual full absorption costing. For purposes of this problem, assume there are no other non-manufacturing expenses.
Required - Suppose that the company chooses to allocate the overhead based on Direct Labor $ instead of lbs of Direct Material. What is the Net Income for the entire business (after considering both products)?
3720
5400
5820
9970