Use the Following Information for the Next 4 Questions

question 114

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 computer department is

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

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Definitions:

Materials

The raw substances used in the manufacturing process to create products or are part of the final product.

Direct Labor

The wages and benefits paid to employees who are directly involved in the production of goods or services.

Overhead Costs

Indirect costs or expenses related to the operation of a business that are not directly tied to a specific product or service, such as utilities, rent, and administrative expenses.

Work in Process

Work in process (WIP) refers to the materials and labor that are in the process of being manufactured but are not yet completed goods.