The Following Is a System of Simultaneous Linear Equations to Allocate

question 2

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.
$$\begin{array} { l c c } \text { Department } & \text { Direct Costs } & \text { Label } \\\text { Subassemblies } & \$ { 5 5 0 , 0 0 0 } & \text { P1 } \\\text { Final assembly } & 775,000 & \text { P2 } \\\text { Marketing } & 285,000 & \text { P3 } \\\text { Building occupancy } & 85,000 & \text {S 1 } \\\text { Research \& development } & 120,000 & \text {S2 } \\\text { Supervision } & 45,000 & \text {S 3 }\end{array}$$
Use of services by other departments is as follows.

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The equation for department S2 (research and development) is:

• A) S2 = $120,000 + 0.15S1 + 0.65S2 + 0.20S3.
• B) S2 = 0.15S1 + 20S3.
• C) S2 = $120,000 + 0.15S1 + 0.20S3.
• D) S2 = $120,000 + 0.40S1 + 0.60S3.

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Definitions:

Canceled Account Balance

The remaining amount of money in an account that has been closed or terminated.

Collection Letters

Written notices sent by creditors to debtors requesting payment of overdue balances.

Overlooked

Failed to be noticed or considered; omitted due to inattention.

Delinquent Balances

Unpaid amounts of money that are past due and have not been settled within the agreed time frame.