Exam 8: Measuring and Assigning Support Department Costs

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 reciprocal method is used, the cost function representing the total cost of personnel will be:

The accountant for Milton, Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected: If the direct method is used, the total cost (including allocations) for the packaging department will be:

Advantages of using budgeted values to calculate support department cost allocation rates include: I. Managers know support department costs in advance II. Managers are motivated to use support department services efficiently III. Allocated support costs for the period are not affected by actual usage so managers have little incentive to minimize the use of support services

The allocation method that ignores all services rendered between support departments is the:

Support department costs are always allocated to individual units of products or services.

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 computer department is:

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 total costs allocated to the operating departments will be:

The accountant for Milton, Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected: If the step-down method is used and maintenance is allocated first, cafeteria costs allocated to packaging will be:

Replacing cost-based reimbursement contracts with fixed fee reimbursement contracts is one way to:

Chambers, Inc. has two support departments (utilities and computer) and two operating departments (A and B). The following data are given: If the direct method is used, how much computer cost would be allocated to operating department B?

Chambers, Inc. has two support departments (utilities and computer) and two operating departments (A and B). The following data are given: If the direct method is used, how much total cost would be allocated to operating department A?

The process of allocating support department costs begins with:

The simplest cost allocation method is the:

Chambers, Inc. has two support departments (utilities and computer) and two operating departments (A and B). The following data are given: If the direct method is used, how much computer cost would be allocated to the utilities department?

Typical support departments include accounting and human resources.

The direct method uses each operating department's allocation rate to allocate costs to a support department.

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: Budgeted hours of service: If Elliot Manufacturing uses the step-down method of allocating support costs beginning with quality control, the maintenance costs allocated to the Assembly Department would be:

Single-rate allocation methods use only one cost pool and one base to allocate both fixed and variable costs.

The stand-alone method:

The accountant for Milton, Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected: If the direct method is used, maintenance costs allocated to the cafeteria will be: