Fairfield Company Allocates Common Building Department Costs to Producing Departments

question 132

Multiple Choice

Fairfield Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: If Fairfield Company uses the direct allocation method, the ratio representing the portion of building costs allocated to Department P1 is

• A) 190,000/202,000.
• B) 2,000/120,000.
• C) 120,000/202,000.
• D) 120,000/190,000.

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Definitions:

Cost

The amount of money required to purchase something or the expense associated with creating or maintaining a service or product.

Supply Metrics

Measures and data used to assess the efficiency and effectiveness of a supply chain, including lead time, inventory levels, and order accuracy.

Efficiency

The ratio of useful output to total input, used to measure the effectiveness of a system, process, or machine in utilizing resources.

Effectiveness

The degree to which objectives are achieved and the extent to which targeted problems are solved.