Pepper Department Store Allocates Its Service Department Expenses to Its

question 35

Multiple Choice

Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: $\begin{array}{l}\begin{array} { l l l } \text { Expense } & \text { Basis for allocation } & \text { Amount } \\\text { Rent } & \text { Square feet of floor space } & \$ 24,000 \\\text { Advertising } & \text { Amount of dollar sales } & \$ 30,000 \\\text { Administrative } & \text { Number of employees } & \$ 45,000\end{array}\\\\\text { The following information is available for its three operating (sales) departments: }\\\\\begin{array} { l c c r c } \text { Department } & \begin{array} { c } \text { Square } \\\text { Feet }\end{array} & \text { Dollar Sales } & \begin{array} { c } \text { Number of } \\\text { employees }\end{array} \\\text { A } & 3,000 & \$280,000 & 6 \\\text { B } & 3,400 & \$300,000 & 8 \\\text { C } & 3,600 & \$420,000 & 10 \\\text { Totals } & \underline { 10,000 } &\$1,000,000 &24 \\\hline\end{array}\end{array}$
-What is the total advertising expense allocated to Department B?

• A) $12,500.
• B) $10,800.
• C) $30,000.
• D) $ 9,000.
• E) $7,500.

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Definitions:

Elementary Units

The simplest, indivisible entities which a data set or a statistical analysis is concerned with.

Finite Result

An outcome or solution that is fixed and definitive, with limitations in terms of size, number, or extent.

Discrete Variable

A variable that can take on a countable number of distinct values and cannot take on every value within its range.

Discrete Random Variable

A variable that can take on a countable number of distinct values, often associated with experiments that have a finite set of possible outcomes.