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The Following Is a System of Simultaneous Linear Equations to Allocate

question 50

Multiple Choice

The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service departments in Westmoreland Company.
$\begin{array} { l c c } \text { Department } & \text { Direct Costs } & \text { Label } \\\text { Subassemblies } &\$ 5 5 0 , 0 0 0 & \text { P1 } \\\text { Final assembly } & 775,000 & \text { P2 } \\\text { Marketing } & 285,000 & \text { P3 } \\\text { Building occupancy } & 85,000 & \text {S1 } \\\text { Research \& development } & 120,000 & \text {S 2 } \\\text { Supervision } & 45,000 & \text {S3 }\end{array}$
Use of services by other departments is as follows.
$The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Westmoreland Company. \begin{array} { l c c } \text { Department } & \text { Direct Costs } & \text { Label } \\ \text { Subassemblies } &\$ 5 5 0 , 0 0 0 & \text { P1 } \\ \text { Final assembly } & 775,000 & \text { P2 } \\ \text { Marketing } & 285,000 & \text { P3 } \\ \text { Building occupancy } & 85,000 & \text {S1 } \\ \text { Research \& development } & 120,000 & \text {S 2 } \\ \text { Supervision } & 45,000 & \text {S3 } \end{array} Use of services by other departments is as follows. - The equation for department P2 (final assembly) is: A) P2 = 0.25S1 + 0.50S2 + 0.30S3. B) P2 = $775,000 + 0.25P2 + 0.20P3 + 0.15S2 + 0.10S3. C) P2 = $775,000 + 0.30S1 + 0.50S2 + 0.20S3. D) P2 = $775,000 +0.25S1 + 0.50S2 + 0.30S3.$
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The equation for department P2 (final assembly) is:

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Definitions:

Value Chain

A business model that describes the full range of activities needed to create a product or service, from raw materials to final delivery to consumers.