Riverview Inc

question 10

Multiple Choice

Riverview Inc. has two service departments (Maintenance and Human Resources) and three production departments (Machining, Assembly, and Finishing) . Maintenance is the largest service department and Assembly is the largest production department. The two service departments service each other as well as the three producing departments. On the basis of this information, which of the following cost allocations would not occur under the direct method?

• A)Maintenance cost would be allocated to Assembly.
• B)Maintenance cost would be allocated to Finishing.
• C)Maintenance cost would be allocated to Machining.
• D)Human Resources cost would be allocated to Finishing.
• E)Maintenance cost would be allocated to Human Resources.

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Definitions:

Overhead Expenses

Costs not directly tied to the creation of a product or service but necessary for running a business, such as rent and utilities.

Volume Discount

A price reduction applied to a purchase based on the quantity of items bought, encouraging larger orders.

Breakeven Price

The market price at which the total costs of production equal the revenue derived from selling a product, resulting in neither profit nor loss.

Sale Price

The final amount at which a product or service is sold to consumers.