Romano Corporation Allocates Administrative Costs on the Basis of Staff

question 50

Multiple Choice

Romano Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow. $$\begin{array} { l l l l } & \underline {\text { Dept. 1 }} & \underline {\text { Dept. 2 }} & \underline { \text { Total } } \\\text { Short-run usage (hours) } & 80,000 & 120,000 & 200,000 \\\text { Long-run usage (hours) } & 90,000 & 110,000 & 200,000\end{array}$$ If Romano uses dual-cost accounting procedures and fixed administrative costs total $1,000,000, the amount of fixed administrative cost to allocate to Department 1 would be:

• A) $400,000.
• B) $450,000.
• C) $500,000.
• D) $850,000.
• E) None of the other answers are correct.

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Definitions:

Differentiation

The process of distinguishing or setting apart entities or elements, often discussed in the context of product marketing or organizational performance.

Complexity

The state or quality of being intricate or complicated, often referring to systems with numerous parts that interact in dynamic and unpredictable ways.

Structures

The arranged and organized systems or frameworks within an organization that determine the manner in which activities are coordinated and directed.

Human Relations

The study and practice of improving interpersonal relationships, especially in a workplace setting, to enhance productivity and job satisfaction among employees.