Hunt Corporation Has Two Service Departments (S1 and S2) and Two

question 33

Multiple Choice

Hunt Corporation has two service departments (S1 and S2) and two production departments (P1 and P2) , and uses the step-down method of cost allocation. Management has determined that S1 provides more service to the firm than S2, and has decided that the number of employees is the best allocation base to use for S1. The following data are available: $\begin{array} { | c | c | c | } \hline \text { Department } && \begin{array} { c } \text { Number of } \\\text { Employees }\end{array} \\\hline \text { S1 } & & 10 \\\hline \text { S2 } & & 20 \\\hline \text { P1 } & & 50 \\\hline \mathrm { P } 2 & & 70 \\\hline\end{array}$ Which of the following statements is (are) true if S1 and S2 have respective operating costs of $280,000 and $350,000?

• A)S2 should allocate a portion of its $350,000 cost to S1.
• B)S1's cost should be allocated over 140 employees.
• C)S1's cost should be allocated over 150 employees.
• D)S2 should allocate a total of $390,000 to P1 and P2.
• E)S1's cost should be allocated over 140 employees and S2 should allocate a total of $390,000 to P1 and P2.

---

Definitions:

Zimbardo

Refers to Philip Zimbardo, a psychologist noted for his research on social influence, including the famous Stanford prison experiment.

Simulated Prison

A psychological experiment setting designed to study the effects of perceived power, focusing on the behavior of individuals designated as prisoners and guards.

Prisoners

Individuals who are held in confinement as a result of being convicted of a crime.

Guards

Individuals tasked with the protection of a specific person, place, or object, often as part of a security force.