Watts Corporation Has a Custodial Services Department That Services the Company's

question 303

Multiple Choice

Watts Corporation has a Custodial Services Department that services the company's Maintenance Department and its two operating departments. Costs of the Custodial Services Department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below: Budgeted costs in the Custodial Services Department total $43,200.Suppose the company uses the direct method of allocation. The amount of Custodial Services Department cost allocated to Operating Department 2 would be:

• A) $25,920
• B) $27,000
• C) $28,800
• D) $21,600

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Definitions:

Fixed Cost

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance premiums.

Screen Printing

A printing technique where a mesh is used to transfer ink onto a substrate, except in areas made impermeable to the ink by a blocking stencil.

Break-even Point

The point at which total costs and total revenue are equal, resulting in no net gain or loss for a business.

Contribution Margin

Contribution margin is the amount of revenue remaining after deducting the variable costs of producing a product, indicating how much contributes to covering fixed costs and generating profit.