Stormy Corporation has two service departments (S1 and S2) and two production departments (P1 and P2), and uses the step-down method of cost allocation. Management has determined that S1 provides more service to the firm than S2, and has decided that the number of employees is the best allocation base to use for S1. The following data are available: Department Number of Employees
S1 10
S2 20
P1 50
P2 70
Which of the following statements is (are) true if S1 and S2 have respective operating costs of $280,000 and $350,000?
Multiple Choice
A. S2 should allocate a portion of its $350,000 cost to S1.
B. S1's cost should be allocated (i. e., spread) over 140 employees.
C. S1's cost should be allocated (i. e., spread) over 150 employees.
D. S2 should allocate a total of $390,000 to P1 and P2.
E. Both S1's cost should be allocated (i. e., spread) over 140 employees and S2 should allocate a total of $390,000 to P1 and P2.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: