(Appendix 4B) Anchor Corporation Has Two Service Departments, Personnel and Engineering

question 33

Multiple Choice

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
-Assume that SJM uses the step-down method to allocate service department costs,starting with Maintenance.The total overhead allocated from Maintenance to Mining would be closest to:

• A) $25,143
• B) $22,957
• C) $51,150
• D) $16,800

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Definitions:

Interest Expense

The charges an entity must pay for the use of borrowed capital over a period.

Lease Liability

An obligation representing the present value of future lease payments that a lessee is committed to making under a lease agreement.

Capital Leases

Lease agreements that involve the lessee effectively owning the asset and accruing its benefits and drawbacks, subject to certain criteria.

Operating Lease

A contractual arrangement giving the lessee temporary use of the property, with continued ownership of the property by the lessor.