Juan Company Has Two Service Departments, Maintenance and Personnel, as Well

question 95

Multiple Choice

Juan Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } &16 & 24 & 48 & 64\end{array}$$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Personnel is:

• A) $16,800
• B) $0
• C) $6,300
• D) $5,040

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Definitions:

Objective Function

A mathematical function that represents the goal or objective of an optimization problem, typically to maximize or minimize some quantity.

Linear Equation

An algebraic equation that represents a straight line, typically in the form y = mx + c, where m is the slope and c is the y-intercept.

Graphical Method

A visual representation technique, often used in operations research and management to solve linear programming problems and analyze data.

Maximizing Problems

Issues or scenarios in optimization where the goal is to find the maximum value of a function subject to certain constraints, often encountered in mathematics and economics.