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

question 121

Multiple Choice

Abound Company has two support departments (S1 and S2) and two producing departments (X and Y) . Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.
What are the total costs to be allocated from Department S2?

• A) $8,000
• B) $9,557
• C) $900
• D) $15,573

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Definitions:

Prime Costs

The combined costs of direct materials and direct labor, which are directly attributable to the production of goods.

Prime Costs

A business's direct costs of materials and labor that are associated with the production of goods or services.

Idle Time

The period of time when resources, such as employees or machines, are available but not in use or producing, often resulting in inefficiency.

Overhead

All indirect costs of running a business that cannot be directly attributed to a specific product or service.