The Accountants for Brock, Inc

question 7

Multiple Choice

The accountants for Brock, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services: Percent of Services Used By
Support Departments Operating Departments
Maint- Admin-
Enance istration Op1 Op2 Op3
Services Supplied By:
Maintenance -- 25% 50% 12.5% 12.5%
(based on square metres)
Administration 20% -- 40% 20% 20%
(based on number of employees)
Assume the reciprocal method. The equation to express the full cost of the Maintenance department is:

• A)Maintenance = $12,000 + (0.50 × Administration)
• B)Maintenance = $12,000 + (0.20 × $54,000)
• C)Maintenance = $12,000 + (0.20 × Administration)
• D)Maintenance = $12,000 + (0.25 × $54,000)

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