The Glowmeter Manufacturing Company Has Two Production Departments (Assembly and Finishing)

question 17

Multiple Choice

The Glowmeter Manufacturing Company has two production departments (Assembly and Finishing) and two service departments (Human Resources and Maintenance) . The projected usage of the two service departments is as follows: $\begin{array} { l r r } & \text { Use of Human } & \text { Use of } \\& \text { Resources } & \text { Maintenance } \\\text { Human Resources } & \text { N/A } & 10 \% \\\text { Maintenance } & 5 \% & \text { N/A } \\\text { Assembly } & 70 \% & 30 \% \\\text { Finishing } & 25 \% & 60 \%\end{array}$ The budgeted costs in the service departments are: Human Resources, $60,000 and Maintenance, $30,000. Using the step-down method and assuming the Human Resources Department cost is allocated first, the total amount of service department cost allocated to the Finishing Department is:

• A)$0.
• B)$15,000.
• C)$37,000.
• D)$42,000.
• E)$60,000.

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Definitions:

Minimum Efficient Scale

The smallest quantity of output at which long-run average cost reaches its lowest level, allowing a firm to fully exploit economies of scale.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

Increases in cost per unit when output is expanded, often due to inefficiencies arising from becoming too large.

Certified Public Accountants

Professionals who have passed the CPA examination and met all other state certification requirements, authorized to provide accounting services to the public.