Exam 15: Allocation of Support-Department Costs, Common Costs, and Revenues

Explain three approaches to determining weights for the the stand-alone revenue-allocation. Which method do managers prefer?

Consider the following information attributed to the material management department Budgeted usage of materials-handling labor-hours 3500 Budgeted cost pools: Fixed costs $154,000 Variable costs $126,000 (3500 hours x $36 per hour) The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments. Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month, what would be the allocation rate and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round final answers to the nearest dollar.)

Corny Solutions processes various corn related food items. One of its facilities located in Iowa, performs some initial processing of corn on the cob once it arrives from the corn fields. The corn from that facility will be further processed elsewhere into corn for popping and corn meal. The costs incurred at the Iowa plant would be considered ________.

Under the step-down method, once a support department's costs have been allocated, all subsequent support-department costs are allocated back to it.

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a single-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume actual usage is used to allocate laboratory costs.

To discourage unnecessary use of a support department, management might ________.

The single-rate method transforms the direct costs per hour into indirect costs to users of that facility.

Software For You encounters revenue-allocation decisions with its bundled product sales. Here, two or more units of the software are sold as a single package. Managers at Software For You are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows: Required: a.Using the stand-alone revenue-allocation method, allocate the $380 packaged price of "All Three" to the three software products 1.with selling prices as the weights. 2.with individual product costs as the weights. 3.based on physical units. b.Allocate the $380 packaged price of "All Three" to the three software products using the incremental revenue-allocation method. Assume Word Processing is the primary product, followed by Spreadsheet, and then Accounting Software.

Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then ________.

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?