Use the Following Information for the Next 4 Questions

question 33

Multiple Choice

Use the following information for the next 4 questions. The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data:
-If the reciprocal method is used, the equation representing the total cost of the cafeteria is

• A) Cafeteria = $35,000
• B) Cafeteria = $35,000 + (0.15 × computer cost)
• C) Cafeteria = $35,000 + (0.10 × computer cost)
• D) Cafeteria = $35,000 + 0.10 × ($55,000 + 0.10 × computer costs)

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Definitions:

Marginal Cost

The supplementary expenditure required to produce an extra unit of a product or service.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Decreasing Returns

A condition in economics where adding more input (like labor or capital) leads to progressively smaller increases in output.

Long-Run

A term referring to a period of time in economics during which all factors of production and costs are variable.