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

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.
-
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.