Quantum Office Supplies Ltd. is an online supplier of office products. Two servi
ID: 2430547 • Letter: Q
Question
Quantum Office Supplies Ltd. is an online supplier of office products. Two service departments provide support for Quantum's operating divisions: administration and technology services Budgeted data for the coming quarter are provided below. Service departments Operating divisions Technology Corporate Consumer sales Administration services sales $281,000 $214,000 40 400 $190,000 $124,000 30 2,800 Operating costs 10 800 50 3,600 Employees Support hours provided Administration operating costs are allocated based on the number of employees in the department and technology services operating costs are allocated based on support hours provided. 4. Assume that Quantum uses the reciprocal method to allocate the operating costs. Where A - administration department and T technology services department, which of the following would be the correct equation to allocate the administration department operating costs (rounded to four decimals)? a) A $281,000 0.3077($214,000 0.1053T) b) A-$281,000 0.3333($214,000 0.1111A) c) A $281,000 0.1111($214,000 0.3333A) d) A $281,0000.1053($214,0000.30877T)Explanation / Answer
The reciprocal method fully recognizes all interdepartmental service costs using simultaneous equations.
Technology serices(T) = 214,000 + [40 / (40+50+30) * A]
= 214,000 + 0.3333A
Administration(A) = 281,000 + [800 / (800+3,600+2,800) * T]
= 281,000 + 0.1111T
= 281,000 + 0.1111 (214,000 +0.3333A)
The answer is C.