Using the Reciprocal Services Method, Which of the Following Equations

question 161

Multiple Choice

Using the reciprocal services method, which of the following equations represents the algebraic expressions for the two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $500,000 of direct costs but also 25% of the Maintenance Department (M) cost and the Maintenance Department that includes not only $450,000 of direct costs but also 30% of the Janitorial Department?

• A)J = $500,000 + (0.25 ÷ M) and M = $450,000 + (0.30 ÷ J)
• B)J = ($500,000 × 0.25) + M and M = ($450,000 × 0.20) + J
• C)J = $500,000 - (0.25 × M) and M = $450,000 - (0.20 × J)
• D)J = $500,000 + (0.25 × M) and M = $450,000 + (0.20 × J)

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, discounted at a specific rate.

Actuarial Information

Data and calculations used by actuaries to assess risks and determine premiums or forecasts for insurance and other industries.

Bond Issuance

The process by which a borrower issues bonds to lenders or investors in order to raise capital, involving agreements to repay the borrowed amount plus interest.

Discount

A reduction from the usual cost of something, typically provided to incentivize purchase or reward customers.