PIR Corporation Has 2 Support Departments and 2 Operating Departments

question 115

Multiple Choice

PIR Corporation has 2 support departments and 2 operating departments. Number of employees is used as an allocation base for personnel support costs, and square metres are used for janitorial support costs. A breakdown of their costs, along with other operating information, is shown below for a recent accounting period: Support Departments Operating Departments
Personnel Janitorial Assembly Finishing
Direct Costs:
Fixed $ 8,000 $ 4,000 $ 3,000 $ 4,000
Variable 6,000 10,000 12,000 6,000
Total $14,000 $14,000 $15,000 $10,000
Number of employees 10 15 30 20
Square metres 3,000 5,000 10,000 10,000
If PIR uses single-rate allocation and the direct method, the total cost (including support department costs) for Product Assembly will be:

• A)$14,000
• B)$28,000
• C)$30,400
• D)None of the above

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Definitions:

Investment

The allocation of resources, such as capital or time, with the expectation of generating an income or profit.

Consumption Goods

Products and services that are used by individuals for personal enjoyment and satisfaction, not for further production.

Supply-Side Economists

Economists who believe that reducing tax rates and deregulation will stimulate economic growth by increasing production.

Real Interest Rate

The excess of the interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.