Jamison Company Has Two Service Departments and Two Producing Departments

question 143

Multiple Choice

Jamison Company has two service departments and two producing departments.Square footage of space occupied by each department follows: $$\begin{array} { | l | r | } \hline \text { Custodial services } & 1,000 \mathrm { ft } \\\hline \text { General administration } & 3,000 \mathrm { ft } \\\hline \text { Producing department A } & 8,000 \mathrm { ft } \\\hline \text { Producing department B } & \underline{8,000 \mathrm { ft }} \\\hline & 20,000 \mathrm { ft } \\\hline\end{array}$$ The department costs of Custodial Services are allocated on a basis of square footage of space.If Custodial Services costs are budgeted at $38,000,the amount of cost allocated to General Administration under the direct method would be:

• A) $0.
• B) $7,125.
• C) $6,000.
• D) $5,700.

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Definitions:

Switching Costs

The costs that a consumer or company incurs as a result of changing from one supplier, product, or system to another.

Entry Barriers

Obstacles that make it difficult to enter a particular market or industry, which may include high startup costs, strict regulations, or strong competition.

Loyalty Programs

Marketing strategies designed to encourage customers to continue to shop at or use the services of businesses associated with each program.

Cost Leader

A strategy where a company becomes the most competitive in the market by having the lowest operating costs.