Use the Following Information for the Next 4 Questions

question 7

Multiple Choice

Use the following information for the next 4 questions.
Arthur Henderson, LLC is a CPA firm that has a Printing Department that makes copies for its two operating departments, Audit and Tax. The Printing Department's budget for 2005 showed budgeted fixed costs of $40,000 plus variable costs of 2 cents per copy. At the beginning of 2005, the Audit Department budgeted its usage at 80,000 copies, and the Tax Department budgeted its usage at 50,000 copies. However, actual usage was 70,000 copies and 60,000 copies made by the Audit and Tax Departments, respectively.
-Under the dual-rate method, what amount of cost is allocated to the Tax Department if fixed costs are allocated based on budgeted usage and variable costs are allocated based on budgeted usage?

• A) $17,667
• B) $16,385
• C) $19,661
• D) None of the above

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Definitions:

Recovery Ratio

A financial metric used to determine the amount of money recovered from an investment or project as compared to the amount invested or spent.

Notional Amount

The total principal or face value involved in a financial transaction, often used in derivatives trading.

Detachable Warrant

A financial instrument that grants the holder the right to purchase a company’s stock at a specified price, which can be detached and sold separately from the bond or preferred stock to which it was originally attached.

Traded Separately

Refers to the practice of trading components of a financial product independently, such as the detachable coupons from bonds being sold separately from the principal.