Answer the Following Questions Using the Information Below:
at the Gregan

question 106

Multiple Choice

Answer the following questions using the information below:
At the Gregan Company,the cost of the personnel department has always been charged to production departments based upon number of employees.Recently,opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs.
Total personnel department costs are $320 000.
$$\begin{array} { l r r r } \text { Department } & \underline { \mathbf { A } } & \underline { \mathbf { B } } & \underline { \mathrm { C } } \\\text { Number of employees } & 30 & 270 & 100 \\\text { The number of new hires } & 8 & 12 & 5\end{array}$$
-If the number of employees is considered the cost driver,what amount of personnel costs will be allocated to Department A?

• A)$24 000
• B)$102 400
• C)$40 000
• D)$10 666

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Definitions:

Lerner Indices

A measure of a firm's market power calculated by the difference between price and marginal cost relative to the price.

Marginal Cost

The additional cost incurred by producing one more unit of a product, reflecting the cost of the resources used in the production of that extra unit.

Patent

A governmental right granted to an inventor, giving the exclusive right to make, use, sell, and import an invention for a certain period of time.

Marginal Cost

The cost added by producing one additional unit of a product or service, an important concept in economics for determining the optimal level of production.