Figure 7-6 Oaks Company Has Two Support Departments, Maintenance Department

question 42

Multiple Choice

Figure 7-6 Oaks Company has two support departments, Maintenance Department (MD) and Personnel Department (PD) , and two producing departments, P1 and P2.The Maintenance Department costs of $30,000 are allocated on the basis of standard service used.The Personnel Department costs of $4,500 are allocated on the basis of number of employees.The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively.
Data on standard service hours and number of employees are as follows:

- Refer to Figure 7-6.Using the direct method, the cost of the Personnel Department allocated to Department P1 is

• A) $4,500.
• B) $2,250.
• C) $2,132.
• D) $2,700.

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Definitions:

Bonds

Fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental, entitling the holder to interest payments and the return of principal at maturity.

Par Value

The nominal value of a bond or stock as declared by the issuer, which might not correspond with its actual market price.

Profit Margin

A financial metric expressing the percentage of revenue that exceeds the costs of goods sold, indicating the profitability of a company's sales.

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue; it is calculated by dividing sales revenue by total assets.