Exam 8: Measuring and Assigning Support Department Costs

Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units produced. Assume the direct method is used. The proportion of Personnel's costs allocated to the Table department is:

Support departments:

Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units produced. Assume the step-down method is used. The amount of cost allocated from Personnel to Maintenance is:

The personnel department provides service to operating departments A and B. Personnel's budget is based on 250 employees (100 in department A and 150 in department B). The budget calls for $40,000 in fixed costs, plus $140 per employee. During a recent month the personnel department incurred $41,000 in fixed costs and $42,200 in variable costs. The two operating departments, A and B, had 120 and 140 employees, respectively. The CEO of the company described above wants to gather information for a decision to outsource the HR function. Which of the following allocation methods would provide useful information?

The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data: Services Provided By Direct costs \ 55,000 \ 35,000 Service provided to: Computer department -- 15\% Cafeteria 10\% -- Operating department 1 50\% 40\% Operating department 1 40\% 45\% If the reciprocal method is used, the computer costs allocated to operating department 1 will be:

The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data: Services Provided By Direct costs \ 55,000 \ 35,000 Service provided to: Computer department -- 15\% Cafeteria 10\% -- Operating department 1 50\% 40\% Operating department 1 40\% 45\% If the reciprocal method is used, the equation representing the total cost of the cafeteria is:

The managers at Elliot Manufacturing are discussing ways to allocate the cost of support departments such as Quality Control and Maintenance to the operating departments. To aid them in this discussion, the controller has provided the following information: Using the direct method, the total amount of overhead (production and support) allocated to the Machining department for each machine hour at Elliot Manufacturing would be:

The practice of using only one base to allocate both fixed and variable costs is called:

Which of the following statements is true about support cost allocation?

The managers at Elliot Manufacturing are discussing ways to allocate the cost of support departments such as Quality Control and Maintenance to the operating departments. To aid them in this discussion, the controller has provided the following information: If Elliot Manufacturing uses the direct method of allocating support department costs, the total support costs allocated to the Assembly department would be:

Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: A If the direct method is used, the fraction of engineering costs allocated to the finishing department will be:

Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: If the reciprocal method is used, what is the amount of engineering cost that will be allocated to all of the other departments? Note: round any support department usage percentages to 2 decimals.

When one user is viewed as being more responsible for common costs than other users, managers can allocate support department costs more fairly with the:

Managers need allocation bases when they: I. Allocate support department costs to operating departments II. Trace direct costs to products III. Trace direct labour to products

When preparing financial statements under generally accepted accounting principles, support department costs are generally classified as:

Bronson, Inc. has two support departments, Personnel and Maintenance, whose costs are to be allocated to the operating department's overhead for budgeting and inventory costing purposes. Projected amounts for the next year follow: If the step-down method is used and the largest department (in terms of direct costs) is allocated first, the total cost allocated to assembly will be:

A properly designed accounting system insures that costs are assigned with complete accuracy to support and operating department cost pools.

Which of the following is the most appropriate cost allocation base for a purchasing department?

Cervantes Industries provides an in-house cafeteria for production and administrative employees. This service costs $25,000 per month, plus $3 per meal served. The company has 800 production employees and 400 administrative employees. During the past month 5,500 meals were served to production employees and 2,000 to administrative. The amount allocated to the operating department using a dual-rate basis with the fixed cost allocation based on number of employees is:

Which departments in an organization provide services internal to the organization?