Question

(1) Harold, owner of Fabulous Fabric, Inc., is interested in using the reciprocal allocation method. Maintenance allocates its costs based on budgeted labor hours. Personnel allocates its costs based on the number of employees serviced. The following data from operations were collected for analysis:

  

		Services Used by
Department	Direct Costs	Maintenance	Personnel	Weaving	Coloring
Maintenance	$300,000	--	1,000 hours	7,000 hours	4,000 hours
Personnel	$160,000	10 employees	--	30 employees	20 employees
Weaving	$650,000
Coloring	$350,000

Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

A. P= $300,000 - $160,000 (1,000/12,000)(Maintenance)

B. P= (1,000/12,000)(Maintenance)

C. P= $160,000 + (1,000/12,000)(Maintenance)

D. P= $160,000 + ($300,000)(Maintenance)

E. P = $160,000 + (10/60)(Maintenance)

Answer 1