The Lots More Store Has a Janitorial Department and a Personnel

question 35

Multiple Choice

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees. The following information is available.
Using the direct method, calculate the amount of Personnel Department cost allocated to Sales Department #3.

• A) $12 000
• B) $15 000
• C) $12 857
• D) $13 500

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Definitions:

Price Takers

Market participants who accept prevailing prices because they have no power to influence the market price due to their small market share.

Perfect Competition

A market structure characterized by a large number of small firms, homogeneous products, free entry and exit, and perfect information, leading to firms being price takers.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output from each new unit of input will eventually decrease.

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, where marginal cost equals marginal revenue.