Marks Corporation Has Two Operating Departments, Drilling and Grinding, and an Office

question 117

Multiple Choice

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $$\begin{array} { l c c c } \text { Office Expenses } & \text { Total } & { \text { Allocation Basi5 } } \\\text { Salaries } & \$30,000 & \text { Number of employees } \\\text { Depreciation } & 20,000 & \text { Cost of goods sold } \\\text { Advertisirg } & 40,000 & \text { Net sales } & \\\text { Item } & \text { Drilling } & \text { Grinding } & \text { Tatal } \\\text { Number of employees } & 1,000 & 1,500 & 2,500 \\\text { Net sales } & \$325,000 & \$ 475,000 & 800,000 \\\text { Cast of goods sald } & \$75,000 & \$ 125,000 & 200,000\end{array}$$ The amount of salaries that should be allocated to Drilling for the current period is:

• A) $30,000.
• B) $18,000.
• C) $15,000.
• D) $10,000.
• E) $12,000.

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Definitions:

Total Tax

The aggregate amount of tax owed to federal, state, local, and foreign taxing authorities.

Cash Flow

The broad sum of financial activities entering and exiting a business, influencing its ability to maintain liquid assets.

Stockholders

Individuals or institutions that own shares in a corporation, giving them ownership rights and potential financial benefits.

Cash Flow

The full extent of monetary movement into and out of a commercial entity, affecting its capacity to liquidate quickly.