Mesa Telcom Has Three Divisions,commercial,retail,and Consumer,that Share the Common Costs

question 18

Multiple Choice

Mesa Telcom has three divisions,commercial,retail,and consumer,that share the common costs of the company's computer server network.The annual common costs are $2,400,000.You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | } \hline & \text { Connections } & \begin{array} { r } \text { Time on } \\\text { Network (hous) }\end{array} \\\hline \text { Commercial } & 60,000 & 120,000 \\\hline \text { Retail } & 80,000 & 150,000 \\\hline \text { Consumer } & 100,000 & 330,000 \\\hline\end{array}$$ What is the allocation rate for the upcoming year,assuming Mesa Telcom uses the single-rate method and allocates common costs based on the time on the network?

• A) $20.00.
• B) $16.00.
• C) $4.00.
• D) $2.86.

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Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning that anyone can consume them without diminishing their availability to others, such as public parks and clean air.

Competitive Markets

Markets characterized by a large number of sellers and buyers, which helps ensure fair prices and efficient distribution of goods and services.

Nonexcludable

A characteristic of a good or service that prevents the owner from effectively excluding others from using it, often leading to free-rider problems.

Public Good

Goods that are non-excludable and non-rivalrous, meaning that consumption by one individual does not reduce availability to others, and people cannot be prevented from using them.