(Appendix 11A)Parker Company Has Two Service Departments-Cafeteria and Engineering-And Two

question 26

Multiple Choice

(Appendix 11A) Parker Company has two service departments-cafeteria and engineering-and two operating departments.The number of employees in each department is given below:
The costs of the Cafeteria are allocated to other departments on the basis of the number of employees in the departments.If these costs are budgeted at $69,375,what would be the amount of cost allocated to Engineering under the direct method?

• A) $0.
• B) $3,700.
• C) $3,750.
• D) $17,344.

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Definitions:

Income Effect

The alteration in a person's or an economy's earnings and its effect on the amount of a product or service they seek to purchase.

Law of Demand

The principle that there is an inverse relationship between the price of a good and the amount of it consumers are willing to buy, all else being equal.

Income Effect

How an individual's or an economic system's revenue shift affects the demand level for a particular good or service.

Substitution Effect

The economic principle that as the price of a good or service rises, consumers will replace it with cheaper alternatives, affecting the demand for goods.