Use the Information Below to Answer the Following Question(s)

question 116

Multiple Choice

Use the information below to answer the following question(s) .Joe's Tire Company has two support departments, Personnel and Maintenance.The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $20,000 are allocated based on the number of employees.Costs of Departments A and B are $40,000 and $60,000, respectively.Data on standard service hours and number of employees are as follows:

-What is the cost of the Maintenance Department allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first?

• A)$16,000
• B)$21,333
• C)$12,800
• D)$32,000
• E)$48,000

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Definitions:

M&M Proposition I

A theory stating that the value of a leveraged firm is the same as the value of an unleveraged firm provided there are no taxes, bankruptcy costs, and asymmetric information.

Debt-Ratio

is a financial metric that compares a company's total debt to its total assets, showing how much of the company's assets are financed by debt.

Capital Structure

Refers to how a firm finances its overall activities and growth through different sources of funds, such as debt and equity.