The Hsu Manufacturing Company Has Two Service Departments: Maintenance and Accounting

question 61

Multiple Choice

The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively.
$$\begin{array} { | l | r | r | r | r | } \hline & \text { Maintenmes } & \text { Accounting } & \text { A } & \text { B } \\\hline \text { Machine hours } & 480 & 20 & 2,300 & 200 \\\hline \text { Number of employees } & 2 & 2 & 8 & 4 \\\hline\end{array}$$

-
What is the cost of the Accounting Department's cost allocated to Department A (rounded to the nearest whole dollar) using the step method and assuming the Maintenance Department's costs are allocated first?

• A) $81,333.
• B) $81,587.
• C) $80,000.
• D) $68,571.

---

Definitions:

Nonsystematic Standard Deviation

A measure of variance in a portfolio's total returns attributable to factors specific to individual securities, as opposed to the market.

Equally-Weighted Portfolio

An equally-weighted portfolio is an investment strategy that gives the same weight, or importance, to each asset in the portfolio, regardless of the size or market value of the companies.

Securities

Securities that signify either an equity stake in a corporation that is publicly traded, a debt interest in a company or government entity, or ownership rights as delineated by an option.

HML Beta

A measure used in finance to assess the sensitivity of an asset or portfolio to a value factor, defined as high minus low book-to-market stocks.