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:

Direct Materials

Raw materials that can be directly traced to the production of specific goods or services in a manufacturing process.

Applied Overhead

An estimate of indirect costs assigned to individual jobs or activities based on a predetermined rate.

Direct Labor

The wages of workers or employees who are directly involved in the production of goods or services.

Applied Factory Overhead

The estimated amount of factory overhead costs assigned to individual units of production.