Andover,, Inc $\text { Support department hours used: }$ $\begin{array}{rr}\text { Department } L & 12,000 \\\text { Department } M & 4,000 \\\text { Total hours } & \mathbf{1 6 , 0 0 0}\end{array}$

question 57

Multiple Choice

Andover,, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows:
$\text { Support department hours used: }$
$\begin{array}{rr}\text { Department } L & 12,000 \\\text { Department } M & 4,000 \\\text { Total hours } & \mathbf{1 6 , 0 0 0}\end{array}$

$\begin{array}{l}\text { Support department costs: }\\\begin{array}{ll}\text { Actual support department costs } & \$ 48,000 \\\text { Budgeted fixed department costs } & \$ 20,000 \\\text { Budgeted variable rate per hour } & \$ 2.50\end{array}\end{array}$
Normal support department usage is 8,000 hours each for Department L and Department M. Assuming the direct method is used and the purpose is product costing, support department costs allocated to Department L are

• A)$30,000.
• B)$20,400.
• C)$24,800.
• D)$20,000.

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Definitions:

Pre-Tax Cost

The expense associated with purchasing or investing before any taxes are applied.

Yield To Maturity

The total return anticipated on a bond if it is held until the date of maturity, accounting for both interest payments and the principal repayment.

Debt

An amount of money borrowed by one party from another, under the condition it is to be paid back usually with interest.

WACC

The Weighted Average Cost of Capital represents the average cost of capital for a company, where each type of capital is weighted according to its proportion in the overall capital structure.