Assume That the Company Uses the Direct Method of Allocation

question 18

Multiple Choice

Assume that the company uses the direct method of allocation. The amount of Custodial Services cost allocated to the Cutting Department would be:

• A)$0
• B)$20,160
• C)$22,400
• D)$19,200

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Definitions:

Present Value Index

A financial metric used to evaluate the present value of future cash flows in relation to the initial investment, also known as the profitability index.

Compound Interest

The method of calculating interest where both the original principal and the accumulated interest from past periods on a loan or deposit are considered.

Estimated Cost

Estimated cost refers to the projection or approximation of the cost associated with a particular project, product, or service.

Straight-Line Depreciation

A method of depreciation where an equal amount of depreciation is allocated each year over the useful life of the asset.