The Accountants for Brock, Inc

question 42

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)
Using the reciprocal method, the allocation from the maintenance department to Op1 department is:

• A)$6,000
• B)$13,600
• C)$13,421
• D)$12,000

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Definitions:

Plant Capacity

Plant capacity refers to the maximum output or production that a manufacturing facility can achieve under normal conditions.

Variable Costs

Costs that vary directly with the level of production or volume of output, in contrast to fixed costs.

Fixed Costs

Costs that remain constant regardless of a company's level of activity, including lease payments, wages, and insurance fees.

Variable Cost

A cost that grows in direct proportion to the volume of output or sales.