The James Company Has Four Departments with Data as Follows

question 181

Multiple Choice

The James Company has four departments with data as follows:
$\begin{array} { | l | r | r | r | r | } \hline & { \text { Service Departments } } && \text { Operating Departments } \\\hline & \text { Cafeteria } & \text { Maintenance } & \text { Milling } & \text { Finishing } \\\hline \text { Budgeted Costs } & \$ 12,000 & \$ 10,000 & \$ 42,000 & \$ 38,000 \\\hline \text { Number of Employees } & 12 & 10 & 84 & 66 \\\hline \text { Labour Hours } & 1,500 & 1,250 & 5,250 & 4,750 \\\hline\end{array}$

- Suppose Cafeteria Department costs are allocated on the basis of number of employees and that the step-down method is used with costs of the Cafeteria Department allocated first.What would be the amount of cost allocated from the Cafeteria Department to Maintenance Department?

• A) $0.
• B) $625.
• C) $698.
• D) $750.

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Definitions:

Price Discrimination

The strategy of selling the same product or service at different prices to different customers, based on factors like willingness to pay, market segments, or purchase quantity.

Consumer's Age

A demographic factor affecting market preferences and purchasing behavior, reflecting different trends and needs based on age groups.

Profits

The financial gain that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Price-Discriminating Monopolist

A monopolist that charges different prices to different groups of consumers for the same product, to maximize profits by capturing consumer surplus.