Hreck, Inc Assuming Use of the Direct Method, Over How Many Square

question 12

Multiple Choice

Hreck, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly) . The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows. $$\begin{array} { l r } \text { Human Resources } & 7,000 \\\text { Building Maintenance } & 11,000 \\\text { Machining } & 20,000 \\\text { Assembly } & 28,000\end{array}$$ Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread) ?

• A) 18,000.
• B) 48,000.
• C) 55,000.
• D) 66,000.
• E) More information is needed to judge.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund day-to-day operations.

Company

An organized entity formed for the purpose of conducting business, wherein it can earn revenues, incur expenses, and operate with the aim of profit.

Inventory Turnover

A metric indicating the frequency at which a company's stock is sold and replenished within a specific timeframe.

Inventory Turnover

An indicator revealing the number of times a company's inventory is turned over and restocked during a specific period, demonstrating how efficiently inventory is handled.