The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company.DepartmentDirect CostsLabelSubassemblies$550,000 P1Final assembly 775,000 P2Marketing 285,000 P3Building occupancy 85,000 S1Research & development 120,000 S2Supervision 45,000 S3Use of services by other departments is as follows. User DepartmentsService Cost CenterSub-assembliesFinal AssemblyMarketingBuilding OccupancyR&DSupervisionBuilding occupancy0.300.250.20---0.150.10R&D0.500.50------------Supervision0.200.300.200.100.20---The equation for department S2 (research and development) is:
A. S2 = $120,000 + 0.40S1 + 0.60S3.
B. S2 = 0.15S1 + 20S3.
C. S2 = $120,000 + 0.15S1 + 0.20S3.
D. S2 = $120,000 + 0.15S1 + 0.65S2 + 0.20S3.
Answer: C
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