Exam 17: Allocation of Support Activity Costs and Joint Costs

Which of the following methods recognizes the fact that fixed and variable service department costs should be allocated separately?

Which of the following choices correctly denotes the data needed to allocate joint costs under the relative-sales-value method?

Assuming use of the step-down method,over how many square feet would the Building Maintenance cost be allocated (i.e. ,spread)?

Madrid has two service departments (General Factory and Human Resources)and two production departments (Machining and Assembly).The company uses the direct method of service-department cost allocation,allocating General Factory cost on the basis of square feet and Human Resources cost on the basis of employees.Budgeted allocation-base and operating data for the four departments follow. A.Allocate the company's service-department costs to the producing departments. B.Compute the overhead application rates for Machining and Assembly. Application rates: Machining: $5,200,000 / 80,000 machine hours = $65 per MH Assembly: $3,300,000 / 150,000 labor hours = $22 per LH

Using the direct method,the amount of Janitorial Department cost allocated to Sales Department no.2 is:

Barry Chemical Company manufactures X-111,X-112,and X-113 from a joint process.The following information is available for the period just ended: A.Does Barry allocate joint costs by using the physical-units method? Explain. A.No.X-112 comprises 28% of the total units produced (14,000 / 50,000);however,the product was allocated 23% of the total joint cost ($18,400 / $80,000).Apparently,then,another method is being used. B.Assume that Barry does not use the physical-units method but instead allocates joint costs by using the relative-sales-value method.Find the four unknowns in the preceding table. B.X-111 has 40% of the sales value ($104,000 / $260,000),resulting in 40% of the joint cost ($80,000 * 40%),or $32,000.This leaves $29,600 to be allocated to X-113 ($80,000 - $32,000 - $18,400).The sales values follow by using the same percentages that are used in the cost allocation ($18,400 / $80,000 = 23%;$260,000 * 23% = $59,800)and ($29,600/ $80,000 = 37%;$260,000 * 37% = $96,200).

Seymore uses the step-down method of cost allocation and allocates cost on the basis of employees.Human Resources cost amounts to $1,200,000,and the department provides more service to the firm than Cafeteria.How much Human Resources cost would be allocated to Assembly?

Douglas Company,a new firm,manufactures two products,J and K,in a common process.The joint costs amount to $80,000 per batch of finished goods.Each batch results in 20,000 liters of output,of which 80% are J and 20% are K. The two products are processed beyond the split-off point,with Douglas incurring the following separable costs: J,$2 per liter;K,$5 per liter.After the additional processing,the selling price of J is $12 per liter,and the selling price of K is $15 per liter. Required: A.Determine the proper allocation of joint costs if the company uses the net-realizable-value method. B.Assume that Douglas sold all of its production of K during the current accounting period.Compute K's sales revenue,cost of goods sold,and gross margin. C.Is the firm's cost-of-goods-sold figure influenced by the choice of a joint-cost allocation method? Briefly explain. C.Yes.Cost of goods sold is based on both separable costs and joint cost.The choice of an allocation method will influence the amount of joint cost charged to the product.

Assuming use of the direct method,over how many square feet would the Building Maintenance cost be allocated (i.e. ,spread)?

The process of allocating fixed and variable costs separately is called:

Dunwoody Corporation has two service departments (Maintenance and Human Resources)and three production departments (Machining,Assembly,and Finishing).The two service departments service the production departments as well as each other,and studies have shown that Maintenance provides the greater amount of service.On the basis of this information,which of the following cost allocations would likely occur under the step-down method?

If the joint production costs are allocated based on the net-realizable-value method,the amount of joint cost assigned to product Y would be:

The joint cost allocated to W under the net-realizable-value method would be:

The point in a joint production process where each individual product becomes separately identifiable is commonly called the:

Suppose that one hog yields 250 pounds of ham,200 pounds of chops,and 50 pounds of miscellaneous items.The sales value of ham is $1.80 per pound;chops,$2.50 per pound;and miscellaneous items,$1.00 per pound.The hog costs $670,and processing costs are $30. Required: A.Determine the proper allocation of joint costs to the three products by using the physical-units method. B.Repeat part "B" by using the relative-sales-value method.

A company that uses activity-based costing would likely allocate costs from activity-cost pools to products and services.

Eastside Hospital has two service departments (Patient Records and Accounting)and two "production" departments (Internal Medicine and Surgery).Which of the following allocations would likely take place under the reciprocal-services method of cost allocation?