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 S1 (Building occupancy) is:
A) S1= .10S3
B) S1 = $170,000 + 1.00S3
C) S1= $170,000 + .10S3
D) S1 = $170,000 + .90S2 + .10S3

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 S1 (Building occupancy) is:
A) S1= .10S3 
B) S1 = $170,000 + 1.00S3 
C) S1= $170,000 + .10S3 
D) S1 = $170,000 + .90S2 + .10S3

Quizplus · Accepted Answer

The correct equation for Department S1 (Building occupancy) is C) S1= $170,000 + .10S3. This equation suggests that the cost for Department S1 includes a fixed component of $170,000 and a variable component that is 10% (.10) of S3, which could represent costs or revenues associated with another department or factor.

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