Marks Corporation Has Two Operating Departments, Drilling and Grinding, and an Office

question 201

Multiple Choice

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $\begin{array}{lll}\text { Ottice Expenses } & \text { Total } & \text { Allocation Basis } \\\text { Salaries } & \$ 30,000 & \text { Number of employees } \\\text { Depreciation } & 20,000 & \text { Cost of goods sold } \\\text { Advertising } & 40,000 & \text { Net sales }\end{array}$

$\begin{array}{lrrrr}\text {Item}&\text {Drilling}&\text {Grinding}&\text {Total}\\\text { Number of emplovees } & 1,000 & 1,500 & 2,500 \\\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \\\text { Cost of goods sold } & \$ 75,000 & \$ 125,000 & \$ 200,000\end{array}$
-The amount of the total office expenses that should be allocated to Grinding for the current period is:

• A) $45,000.
• B) $54,250.
• C) $600,000.
• D) $35,750.
• E) $90,000.

---

Definitions:

Outstanding Bonds

Bonds issued by a company or government that are currently held by investors and have not yet matured or been redeemed.

Remaining Life

The estimated time period during which an asset is expected to be economically usable, with its cost being depreciated over this duration.

Consolidation Process

The consolidation process involves combining the financial statements of a parent company with those of its subsidiaries to produce a single set of financial statements that represent the financial condition and operations of the entire group as a single entity.

Acquisition

Acquisition refers to the process where one company takes over controlling interest in another company, either through purchase of shares or assets.