Ransall Auto Parts Has Two Service Departments-Maintenance and Personnel, and Three

question 58

Multiple Choice

Ransall Auto Parts has two service departments-maintenance and personnel, and three production departments-fabrication, assembly, and packaging. Service costs are allocated to producing departments using the direct method. Information on overhead in each department and possible allocation bases appear below: $\begin{array}{lrrrrr}&\text { Maintenance }&\text {Personnel}&\text { Eabrication }&\text {Assembly}&\text {Packaging }\\\hline\text { Cost } & \$ 90,000 & \$ 130,000 & & & \\\text { Machine hours } & & & 12,000 & 30,000 & 18,000 \\\text { Employees } & 4 & 16 & 24 & 30 & 20\end{array}$ Using the most logical activity base, how much personnel cost will be allocated to the packaging department?

• A) $7,150
• B) $39,000
• C) $33,800
• D) $42,250

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Definitions:

Interest Due

The amount of interest payment that is owed but has not yet been paid at a particular date.

Maturity

This term refers to the date on which a financial obligation (such as a bond or loan) must be repaid in full.

Aging Of Receivables

A method used in accounting to estimate the amount of receivables that may not be collectible by categorizing them according to the length of time they have been outstanding.

Uncollectible

Refers to accounts receivable that are considered to be uncollectible and thus written off as a loss.