Todweed Academy Allocates Marketing and Administrative Costs to Its Three

question 22

Multiple Choice

Todweed Academy allocates marketing and administrative costs to its three schools based on total annual tuition revenue for the schools: $\begin{array}{ccccc} & \text { Lower } & \text { Middle } & \text { Upper } \\{\text { School }} & \text { School } & \text { School } & \text { School } & \text { Total } \\\text { Tuition revenue } & \$ 1,000,000 & \$ 800,000 & \$ 1,200,000 & \$ 3,000,000\\\text { Marketing and }\\\text { administrative }&&&&\$1,200,000\end{array}$ Using revenue as an allocation base, the amount of costs allocated to the Middle School is calculated to be:

• A) $240,000.
• B) $320,000.
• C) $400,000.
• D) $480,000.
• E) $600,000.

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset evenly over its useful life.

Simple Rate Of Return

A financial metric that calculates the increase in profits or savings expected from an investment as a percentage of the initial investment cost.

Annual Cost Savings

The reduction in costs achieved during a fiscal year, enhancing the organization's profitability.

Discount Rate

This rate is applied within discounted cash flow analysis to determine the contemporary monetary worth of future cash movements.