Using the Direct Method, Pone Hill Company Allocates Janitorial Department

question 29

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 Cafeteria Department incurs costs of $500,000, how much of that cost is allocated to the Assembly Department?

• A)$375,000
• B)$111,000
• C)$125,000
• D)$91,000

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Definitions:

Income Summary

An accounting tool used to aggregate all income and expense accounts to determine net income or loss for a period.

Revenue

Income that a company receives from its normal business activities, usually from the sale of goods and services to customers.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby resetting the temporary accounts for the next period.

Withdrawal Account

An account that tracks the money taken out of a business by its owners for personal use.