The Dollar Store Has a Human Resources Department and a Janitorial

question 7

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 step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is:

• A) $12,000.
• B) $12,857.
• C) $13,500.
• D) $15,000.
• E) $22,500.

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Definitions:

Contribution Margin

The amount by which the sale of a product or service exceeds its production cost, used to cover fixed costs and generate profit.

Depreciation Expense

Distributing the expense of a physical asset across its lifespan.

Fixed Costs

Costs that do not vary with the level of production or sales, including expenses like rent, salaries, and insurance.

Variable Costs

Expenses that change in proportion to the activity of a business, such as utility bills that increase with production volume.