Letter Corporation Has Two Service Departments (A and B) That

question 27

Multiple Choice

Letter Corporation has two service departments (A and B) that provide service to each other and to two operating departments (X and Y) . A provides 20% of its service to B, 30% of its service to X, and 50% of its service to Y. B provides 10% of its service to A, 45% of its service to X, and 45% of its service to Y. Operating costs in A are $300,000. Operating costs in B are $180,000. Cost allocations are made starting with department A. No distinction is made between variable and fixed costs.
-If service department costs are allocated using the step-down method, what is the total amount of service cost that will be allocated to Y?

• A) $231,000
• B) $240,000
• C) $258,000
• D) $270,000

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Definitions:

Cilia

Hair-like projections from the outside of the cell membrane on some cell types.

Pharynx

The membrane-lined cavity behind the nose and mouth, connecting them to the esophagus, part of the digestive and respiratory systems.

Respiratory Rate

The number of breaths taken per minute, an important vital sign indicating the efficiency of the respiratory system.

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration, and absorbed by plants in photosynthesis.