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:

Monopolistically Competitive

A market structure where many companies sell products that are similar but not identical, allowing for some degree of market power and price control by individual firms.

Profit-Maximizing Level

The optimal point at which the difference between total revenue and total cost is the greatest, indicating the highest possible profit for a firm.

Short Run

a period in economics during which at least one input is fixed and cannot be changed, limiting a firm's ability to adjust production.

Fixed Costs

Expenses that do not change in proportion to the activities of a business within a certain range of operation, such as rent, salaries, and insurance.