Answer the following questions using the information below:
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,100,000 and the Electric Lamp Division used $3,900,000 for expansion. Interest costs on the bond totaled $975,000 for the year.
-What amount of interest costs should be allocated to the Electric Lamp Division?
A) $292,500
B) $682,500
C) $2,730,000
D) $3,900,000

Question

Quizplus · Accepted Answer

To allocate the interest costs to each division, we need to find out what percentage of the bond each division used.

For Electric Mixer Division: 
$9,100,000 ÷ $13,000,000 = 0.7 or 70%

For Electric Lamp Division: 
$3,900,000 ÷ $13,000,000 = 0.3 or 30%

To find out the amount of interest costs allocated to the Electric Lamp Division, we multiply the total interest costs by the percentage used by the division: 
$975,000 x 0.3 = $292,500

Therefore, the answer is A) $292,500.

Answer the Following Questions Using the Information Below