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 S2 (Research and Development) is:
A) S2 = $240,000 + .15S1 + .65S2 + .20S3
B) S2 = .15S1 + .20S3
C) S2= $240,000 + .15S1 + .20S3
D) S2 = $240,000 + .40S1 + .60S3

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 S2 (Research and Development) is:
A) S2 = $240,000 + .15S1 + .65S2 + .20S3 
B) S2 = .15S1 + .20S3 
C) S2= $240,000 + .15S1 + .20S3 
D) S2 = $240,000 + .40S1 + .60S3

Quizplus · Accepted Answer

The correct equation for Department S2 (Research and Development) should include a fixed cost component ($240,000) and variable components based on the budgets of other departments (S1 and S3), without including S2 itself in its own equation. Option C correctly represents this with a fixed cost and percentages of S1 and S3's budgets.

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