(Appendix 4B) Watts Corporation Has a Custodial Services Department That

question 8

Multiple Choice

(Appendix 4B) Watts Corporation has a Custodial Services Department that services the company's Maintenance Department and its two operating departments. Costs of the Custodial Services Department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below:
Budgeted costs in the Custodial Services Department total $43,200.
-Suppose the company uses the step-down method of allocation and the costs of the Custodial Services Department are allocated first.The amount of Custodial Services Department cost allocated to the Maintenance Department would be:

• A) $2,592
• B) $2,700
• C) $2,880
• D) $0

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Definitions:

Corporate Bond

A debt security issued by corporations to raise capital, promising to pay back the principal along with interest at a specified rate.

Mortgage-Related

Pertains to financial instruments or activities that involve the financing of real estate transactions through loans secured by a mortgage.

Federal National Mortgage Association

A government-sponsored enterprise (GSE) known as Fannie Mae; it expands the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities.

U.S. Treasury

Refers to the federal government department responsible for managing government revenue and also to the securities (like bonds) it issues, considered low-risk investments.