The Managers of Conch, Inc

question 58

Multiple Choice

The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data: Services Provided By
Computer Cafeteria
Direct costs $55,000 $35,000
Service provided to:
Computer department ---- 15%
Cafeteria 10% ----
Operating department 1 50% 40%
Operating department 2 40% 45%
If the reciprocal method is used, the equation representing the total cost of the cafeteria is:

• A)Cafeteria = $35,000
• B)Cafeteria = $35,000 + (0.15 × computer cost)
• C)Cafeteria = $35,000 + (0.10 × computer cost)
• D)Cafeteria = $35,000 + 0.10 × ($55,000 + 0.10 × computer costs)

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Definitions:

Department of Agriculture

A government department responsible for developing and executing federal policies on farming, agriculture, forestry, and food, aiming to meet the needs of farmers and ensure food safety.

Official Poverty Line

The officially established income level that distinguishes the poor from the nonpoor. It is set at three times the cost of the Department of Agriculture’s minimum food budget.

After-Tax Income

Before-tax income minus taxes paid.

Before-Tax Income

Market income plus transfers.