Pardee, Inc

question 3

Multiple Choice

Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Operating Departments
Engineering Administration Assembly Finishing
Direct costs $25,000 $15,000 $200,000 $350,000
Number of employees 15 10 300 450
Engineering supervisor's time 30% 15% 35% 20%
If the direct method is used, the fraction of engineering costs allocated to the finishing department will be:

• A)20/55
• B)20/100
• C)20/70
• D)20/85

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Definitions:

Required By Investors

Refers to the expectations or conditions that investors demand before committing capital to an investment.

Capital Structure

The combination of borrowing and ownership investments utilized by a company to finance its activities and expansion.

WACC

A method known as the Weighted Average Cost of Capital (WACC) is used to calculate a corporation's cost of capital, with every capital category assigned a proportional weight.

Historic Costs

The original monetary value of an asset or transaction, without accounting for inflation, depreciation, or appreciation, used as a basis for the financial accounting of assets.