Use the Following Information to Answer the Following Questions

question 49

Multiple Choice

Use the following information to answer the following Questions
Aldo Industries, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly) . The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows.

-Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread) ?

• A) 19,000.
• B) 44,000.
• C) 50,000.
• D) 63,000.
• E) More information is needed to judge.

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Definitions:

Soft Capital Rationing

Internal limitations set by a company's management on the amount of funding allocated for new projects.

Debt Covenants

Agreements between a borrower and lender that stipulate certain conditions the borrower must adhere to, which can pertain to financial ratios, levels of income, or other financial benchmarks.

Time Value

The idea that having money now is more valuable than having the same sum at a later date because of its ability to earn more over time.

Profitability Index

A financial tool used to determine the relationship between the costs and benefits of a proposed project, calculated by dividing the present value of future cash flows by the initial investment.