Chase Company Owns 80% of Lawrence Company and 40% of Ross

question 112

Multiple Choice

Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns 30% of Ross Company. Separate operating incomes for 2011 of Chase, Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company also retains a $20,000 unrealized gain in their current income figures. Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute Chase's attributed ownership in Ross.

• A) 40%.
• B) 64%.
• C) 24%.
• D) 32%.
• E) 12.8%.

---

Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific products or projects based on their use of activities, providing more accurate cost information.

Total Overhead Applied

The total amount of indirect manufacturing costs allocated to units of product based on a predetermined rate.

Activity-Based Costing

An accounting methodology that assigns costs to products or services based on the activities and resources that go into their production, providing more accurate product costing.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated before the actual costs or activity levels are known.