Sharon Manufacturing
the Sharon Manufacturing Company Has Two Service Departments

question 55

Multiple Choice

Sharon Manufacturing
The Sharon Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} & \text { Service } & \text { Service } & \text { Producing } & \text { Producing } \\& \text { Dept. 1 } & \text { Dept. 2 } & \text { 1 } & \text { 2 } \\\hline \text { Department Costs } & \$ 20000 & \$ 12000 & \$ 80000 & \$ 90000 \\\text { Machine hours } & 12000 & 8000 & 12000 & 60000 \\\text { Square Feet Occupied } & 3000 & 3000 & 9000 & 6000\end{array}$

The costs of service departments 1 and 2 are allocated on the basis of machine hours and square feet occupied, respectively. Total overheads from producing departments are allocated to products on the basis of direct labour hours, which are 5000 in Producing Department 1 and 2000 hours in Producing Department 2. Service department 1 is allocated first.
-Assuming that Sharon Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to service department 2 under the step method would be:

• A) $ 0
• B) $1600
• C) $2000
• D) $2400

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Definitions:

Pay Incentive

A financial or material reward provided to employees as a means to increase productivity, motivation, or achieve specific business outcomes.

Positive Reinforcement

A method of encouraging desired behavior by offering rewards or positive outcomes.

Critical Project

A project of high importance that often has deadlines, specific goals, and significant consequences for success or failure.

Overcome Obstacle

The process of dealing with and successfully navigating around barriers or challenges.