Figure 4-1 The Foremost Company Predicted Factory Overhead for 2016 and 2017

Multiple Choice

Figure 4-1
The Foremost Company predicted factory overhead for 2016 and 2017 would be $120,000 for each year. The predicted activity for 2016 and 2017 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 2016 and 2017 was $120,000. Assume that it takes one direct labor hour to make one finished unit.
-Refer to Figure 4-1. When the annual estimated factory overhead rate is used, the gross profits for 2016 and 2017, respectively, are

A) $150,000 and $150,000.
B) $150,000 and $100,000.
C) $250,000 and $250,000.
D) $100,000 and $150,000.