Smith Company and Jones Company currently share an employee dining facility.Jones Company employs fewer people and believes that they should not be required to pay one-half of the $300,000 costs incurred for the facility.An independent consulting firm stipulated that Smith Company could receive the same services for $150,000 while Jones's employees could receive comparable services for $100,000.What will be Jones's allocated cost if the stand-alone method is used?

Question

Quizplus · Accepted Answer

The stand-alone method allocates costs based on the cost each company would incur if they were to operate the facility individually. According to the independent consulting firm, Smith would incur a cost of $150,000 to operate the facility while Jones would incur a cost of $100,000. Since the total cost of the facility is $300,000, Smith's allocated cost would be $150,000 and Jones's allocated cost would be $100,000. Therefore, the best choice is C.

Smith Company and Jones Company Currently Share an Employee Dining