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What is the net income for the entire business

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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

Reference no: EM131763947

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