Marks Corporation Has Two Operating Departments, Drilling and Grinding, and an Office

question 86

Multiple Choice

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $\begin{array}{lll}\text { Office Expenses } & \text { Total } & \text { Allocation Basis } \\\text { Salaries } & \$ 30,00 \mathrm{C} & \text { Number of employees } \\\text { Depreciation } & 20,000 & \text { Cost of goods sold } \\\text { Advertising } & 40,000 & \text { Net sales }\end{array}$ $\begin{array}{lrrr}\text { Item } &{\text { Drilling }} & \text { Grinding } & \text { Total } \\\text { Number of employees } & 1,000 & 1,500& 2,500 \\\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \\\text { Cost of goods sold } & \$ 75,000& \$ 125,000 & \$ 200,000\end{array}$ The amount of depreciation that should be allocated to Grinding for the current period is:

• A) $20,000.
• B) $25,000.
• C) $7,500.
• D) $12,500.
• E) $40,000.

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Definitions:

Operation Of Law

Changes in rights or obligations that occur automatically due to existing legal rules, without the need for an agreement or court order.

Renunciation

The formal rejection of a claim, right, or possession, often involving legal ramifications.

Termination Option

A termination option is a contract provision that allows a party to end the agreement under specified conditions before its natural conclusion.

Operation of Law

Changes in legal status or rights that occur automatically due to existing legal rules, rather than through the action of any party.