Stronghold, Inc For Purposes of Performance Evaluation, Fixed Costs Allocated to Brochure

question 19

Multiple Choice

Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.
Normal and actual activity (brochures made) are as follows: $\begin{array}{lll}&\text { Brochure Center } 1 &\text { Brochure Center } 2\\\text { Normal activity (brochures) } & 1,200,000 & 800,000 \\\text { Actual activity (brochures) } & 1,000,000 & 880,000\end{array}$
For purposes of performance evaluation, fixed costs allocated to Brochure Center 1 are:

• A)$60,000.
• B)$72,000.
• C)$65,600.
• D)$75,200.

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Definitions:

Capital Intensity Ratio

A financial metric that measures the amount of capital needed per dollar of revenue generated, indicating the intensity of the capital used in the business operations.

Times Interest Earned

A financial metric assessing a company's ability to meet its interest obligations from its earnings before interest and taxes.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, represented as a financial charge or fee.