Evergreen Company Has Two Support Departments (S1 and S2) and Two

question 151

Multiple Choice

Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2) . Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

• A) 1,500/5,000.
• B) 1,500/4,000.
• C) 1,500/5,500.
• D) 1,500/2,000.

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Definitions:

Risk of Loss

Refers to the possibility that an asset might be destroyed, damaged, or lost, causing financial loss to its owner.

Delivery

The process of transporting goods from one location to another or the act of transferring ownership or possession of an asset from a seller to a buyer.

Sale on Approval

A conditional sales agreement allowing the buyer to return the item if it doesn't meet their approval.

Destination Contract

A contract under which the seller is required to deliver goods to a place of destination. The title and risk of loss remain with the seller until the goods reach the place of destination.