Jamison Company Has Two Service Departments and Two Producing Departments

question 136

Multiple Choice

Jamison Company has two service departments and two producing departments. Square footage of space occupied by each department follows:
$\begin{array}{lr}\text { Custodial services } & 1,000 \mathrm{feet} \\\text { General administration } & 3,000 \mathrm{feet} \\\text { Producing Department A } & 8,000 \mathrm{feet} \\\text { Producing Department B } &\underline{ 8,000 \mathrm{feet} }\\ &\underline{ 20,000 \mathrm{feet}}\end{array}$
The department costs of Custodial Services are allocated on a basis of square footage of space. If Custodial Services costs are budgeted at $38,000, the amount of cost allocated to General Administration under the direct method would be:

• A) $0.
• B) $7,125.
• C) $6,000.
• D) $5,700.

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Definitions:

Insurable Interest

A requirement stating that a person seeking to purchase an insurance policy must have a direct interest in protecting the object of the insurance from loss.

Equitable Interest

A legal interest in property that gives a party a financial stake or benefit in the property, though not necessarily an ownership interest.

Life Insurance Policy

A contract between an individual and an insurance company, where the company pays a designated beneficiary a sum of money upon the death of the insured person.

Covered Peril

A specific risk or cause of loss that is protected against under the terms of an insurance policy.