Use the following information for the next 4 questions.
The accountants for Brock, Inc. are preparing the operating departments overhead budgets. The maintenance department direct costs are $12,000, and the administration department direct costs are $54,000. The following data have been collected about use of services: (based on number of employees)
-Assume the reciprocal method. The equation to express the full cost of the maintenance department is
A) Maintenance = $12,000 + (0.50 × Administration)
B) Maintenance = $12,000 + (0.20 × $54,000)
C) Maintenance = $12,000 + (0.20 × Administration)
D) Maintenance = $12,000 + (0.25 × $54,000)

Question

Use the following information for the next 4 questions.
The accountants for Brock, Inc. are preparing the operating departments overhead budgets. The maintenance department direct costs are $12,000, and the administration department direct costs are $54,000. The following data have been collected about use of services:  (based on number of employees)
-Assume the reciprocal method. The equation to express the full cost of the maintenance department is
A) Maintenance = $12,000 + (0.50 × Administration) 
B) Maintenance = $12,000 + (0.20 × $54,000) 
C) Maintenance = $12,000 + (0.20 × Administration) 
D) Maintenance = $12,000 + (0.25 × $54,000)

Quizplus · Accepted Answer

The reciprocal method considers the interdepartmental services provided between support departments. Here, the maintenance cost includes a portion of the administration cost, represented by 0.20 × Administration.

Use the Following Information for the Next 4 Questions