Use the following to answer questions:
The following costs were incurred in three operating departments and three service departments in
Gagetown Molding Company:

The use of services by other departments is as follows:

The following questions refer to a system of simultaneous linear equations that allocate costs using the reciprocal method.
-The equation for department P2 (final assembly) is:
A) P2 = .25S1 + .50S2 + .30S3
B) P2= $1,550,000 + .25P2 + .20P3 + .15S2 + .10S3
C) P2 = $1,550,000 + .30S1+ .50S2 + .20S3
D) P2 = $1,550,000 + .25S1 + .50S2 + .30S3

Question

Use the following to answer questions:
The following costs were incurred in three operating departments and three service departments in
Gagetown Molding Company:
  
The use of services by other departments is as follows:
  
The following questions refer to a system of simultaneous linear equations that allocate costs using the reciprocal method.
-The equation for department P2 (final assembly) is:
A) P2 = .25S1 + .50S2 + .30S3 
B) P2= $1,550,000 + .25P2 + .20P3 + .15S2 + .10S3 
C) P2 = $1,550,000 + .30S1+ .50S2 + .20S3 
D) P2 = $1,550,000 + .25S1 + .50S2 + .30S3

Quizplus · Accepted Answer

The correct equation for department P2 (final assembly) includes a fixed cost component ($1,550,000) and variable components based on the inputs from S1, S2, and S3 with the respective coefficients .25, .50, and .30, as shown in option D.

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