Poteete,Inc

question 22

Multiple Choice

Poteete,Inc. ,allocates service department costs to operating departments using the step-down method.The company has two service departments,Administration and Physical Plant,and two operating departments,Assembly and Testing.Data concerning those departments follow: Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied.The total Testing Department cost after allocations is closest to:

• A)$539,189
• B)$526,180
• C)$538,930
• D)$537,376

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Definitions:

Substitution Effect

The change in consumption patterns due to a shift in the relative prices of goods, leading consumers to substitute one good for another.

Input Price

The cost of resources (labor, materials, etc.) used in the production of goods or services.

Complementary

Goods or services that are often used together, such that the increase in consumption of one leads to an increase in the consumption of the other.

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate within a certain period.