The Following Information Pertains to Amon Schrock Corporation: Amon

question 81

Multiple Choice

The following information pertains to Amon Schrock Corporation: Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

• A) $28.80.
• B) $24.78.
• C) $7.28.
• D) $5.40.

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Definitions:

Cost Center

A department or function within an organization to which costs can be allocated, but which does not directly generate revenue.

Departmental Operating Margin

A measure of the profitability of individual departments within a business, calculated as the difference between departmental revenue and expenses.

Operating Expenses

Costs incurred in the normal operation of a business, excluding the cost of goods sold.

Direct Expenses

Expenses that can be traced directly to a specific department.