The Dollar Store Has a Human Resources Department and a Janitorial

question 76

Multiple Choice

The Dollar Store has a Human Resources Department and a Janitorial Department that provide service to three sales departments. The Human Resources Department cost is allocated on the basis of employees, and the Janitorial Department cost is allocated on the basis of space. The following information is available: $\begin{array}{c}\begin{array}{lll}\\\\ \text {Budgeted cost}\\ \text {Space in square feet}\\ \text {Number of employees}\end{array}\begin{array}{c}\text { Human } \\\underline{\text { Resources }} \\ \$ 45,000 \\4,000 \\5\end{array}\begin{array}{r}\\\underline{\text { Janitorial }} \\\$ 30,000 \\1,000 \\10\end{array}\begin{array}{c}\\\underline{\text {Sales \#1}}\\\\20,000 \\15\end{array}\begin{array}{c}\\\underline{\text {Sales \#2}}\\\\30,000 \\45 \end{array}\begin{array}{c}\\\underline{\text {Sales \#1}}\\\\50,000 \\30\end{array}\end{array}$
Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is:

• A) $8,571.
• B) $8,654.
• C) $9,000.
• D) $10,350.
• E) $14,210.

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Definitions:

Fixed Cost

Costs that do not vary with the level of production or sales, remaining constant regardless of business activities.

High-Low Method

A technique used in cost accounting to estimate variable and fixed costs by analyzing the highest and lowest levels of activity and their associated costs.

Variable Cost

Variable costs are expenses that vary directly with the level of production or sales volume, such as raw materials and packaging.

Fixed Cost

Expenses that do not change in proportion to the level of goods or services produced by a business.