Pumpkin Enterprises began operations on January 1, 20x1, with all of its activities conducted from a single facility. The company's accountant concluded that the year's building depreciation should be allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing activities, 45%. If Pumpkin sold 60% of 20x1 production during that year, what percentage of the depreciation would appear (either directly or indirectly) on the 20x1 income statement?
A) 27%.
B) 45%.
C) 55%.
D) 82%.
E) 100%.

Question

Quizplus · Accepted Answer

Explanation: 45% of the depreciation is allocated to manufacturing activities, and since 60% of the production was sold, 60% of the 45% (which is 27%) will appear in the cost of goods sold. The remaining 20% (selling) and 35% (administrative) will appear in operating expenses. Therefore, 27% + 20% + 35% = 82% of the depreciation will appear on the income statement.

Pumpkin Enterprises Began Operations on January 1, 20x1, with All