Evergreen Company Has Two Support Departments (S1 and S2) and Two

question 71

Multiple Choice

Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2) . Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet. Data on direct department costs, number of employees, and space occupied are as follows: $$\begin{array} { | l | c | c | c | c | } \hline & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \\\hline \text { Direct dept. costs } & \$ 7,500 & \$ 11,000 & \$ 27,500 & \$ 30,000 \\\hline \text { Number of employees } & 10 & 5 & 20 & 25 \\\hline \text { Space occupied (sq. ft.) } & 1,000 & 500 & 1,500 & 2,500 \\\hline\end{array}$$ If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

• A)1,500/5,000.
• B)1,500/4,000.
• C)1,500/5,500.
• D)1,500/2,000.

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Definitions:

Stock Dividend

A payment to shareholders in the form of additional shares of stock rather than cash.

Cash Dividend

A cash dividend is a payment made by a company out of its earnings to shareholders in the form of cash.

Financial Statement

A written record, detailing a business entity's performance, financial strength, and cash flow, used by stakeholders to make informed decisions.

Contributed Capital

Funds raised through the issuance of shares by a corporation to its shareholders.