Using the Direct Method, Pone Hill Company Allocates Janitorial Department

question 63

Multiple Choice

Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has the following information about its two service departments and two production departments, Cutting and Assembly: If the Janitorial Department incurs costs of $200,000, how much of that cost is allocated to the Cutting Department?

• A)$40,000
• B)$160,000
• C)$20,000
• D)$19,800

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Definitions:

Underallocation

A situation in which resources are not distributed efficiently, often leading to a failure to meet demand for certain goods or services.

Farm Subsidies

Government aid provided to farmers to boost their income, regulate the production of farm products, and affect the price and availability of these commodities.

Agribusiness

The portion of the agricultural and food product industries that is dominated by large corporations.

Competitive Markets

Markets where multiple sellers offer a similar product, leading to price competition and quality improvements.