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

question 130

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.What is the combined total department costs for the producing departments after allocation of the support departments?

• A) $24,000
• B) $58,500
• C) $34,500
• D) $26,000

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit varies with the quantity produced.

Pure Monopolist

An entity that is the sole provider of a particular product or service in the market, facing no direct competition.

Pure Monopoly

A market structure where a single seller controls the entire supply of a product or service, and no close substitutes exist.

Long-run Equilibrium

A state in which all resources are optimally allocated, and all firms in the industry are making normal profits, with no external pressures for change.