Question 1

One of the purposes of allocating indirect costs is to justify costs or compute reimbursement amounts.

Accepted Answer

A) True 
 B)False  True

Question 2

The direct allocation method provides key information for outsourcing decisions regarding support services.

Accepted Answer

A) True 
 B)False  False

Question 3

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales, is an example of which criteria for cost allocation decisions?

Accepted Answer

A) ability to bear 
B) benefits expended 
C) causality 
D) fairness and equity 
E) benefit received 
A) ability to bear 
B) benefits expended 
C) causality 
D) fairness and equity 
E) benefit received E

Question 4

For each item listed, select the appropriate purpose of cost allocation from the list below.A purpose may be used more than once.
A)To provide information for economic decisions
B)To motivate managers and other employees
C)To measure income and assets for reports to external parties
D)To justify costs or compute reimbursement amounts
-To cost inventories for the balance sheet

Accepted Answer

The answer of For each item listed, select the appropriate...

Question 5

Under which of the following methods of cost allocation is there no distinction between fixed and variable costs?

Accepted Answer

A) fixed method 
B) dual-rate method 
C) homogeneous method 
D) standard cost method 
E) single-rate method 
A) fixed method 
B) dual-rate method 
C) homogeneous method 
D) standard cost method 
E) single-rate method

Question 6

Use the information below to answer the following question(s).Low-Cost Rentals Ltd.incurred $60,000 of common fixed costs and $90,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used.   For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-A disadvantage of allocating fixed costs using a budgeted rate and actual usage is that

Accepted Answer

A) supplying division managers may be tempted underestimate usage when budgeting unit costs. 
B) the allocation would capture the cause-and-effect relationship. 
C) variation in usage will result in variances that need to be managed. 
D) changes in one department's usage should not affect another department's allocation. 
E) some organizations offer rewards to managers who make accurate forecasts. 
A) supplying division managers may be tempted underestimate usage when budgeting unit costs. 
B) the allocation would capture the cause-and-effect relationship. 
C) variation in usage will result in variances that need to be managed. 
D) changes in one department's usage should not affect another department's allocation. 
E) some organizations offer rewards to managers who make accurate forecasts.

Question 7

An electronics manufacturer is trying to encourage its engineers to design simpler products so that overall costs are reduced.Required:
Which of the value-chain function costs (R&D, design, production, marketing, distribution, customer service)should be included in product-cost estimates to achieve the above purpose? Why?

Accepted Answer

All costs that are affected by

Question 8

Resource consumption accounting (RCA)employs an allocation procedure akin to a dual-rate system.For each cost/resource pool, cost assignment rates

Accepted Answer

A) for fixed costs are based on actual quantity, while rates for variable costs are based on budgeted quantities. 
B) for fixed costs are based on practical capacity supplied, while rates for variable costs are based on actual quantities. 
C) for fixed and variable costs are based on actual output quantities. 
D) for fixed and variable costs are based on budgeted quantities. 
E) for fixed costs are based on practical capacity supplied, while rates for variable costs are based on budgeted quantities. 
A) for fixed costs are based on actual quantity, while rates for variable costs are based on budgeted quantities. 
B) for fixed costs are based on practical capacity supplied, while rates for variable costs are based on actual quantities. 
C) for fixed and variable costs are based on actual output quantities. 
D) for fixed and variable costs are based on budgeted quantities. 
E) for fixed costs are based on practical capacity supplied, while rates for variable costs are based on budgeted quantities.

Question 9

The single-rate cost allocation method provides better information for decision making than the dual-rate method.

Accepted Answer

A) True 
 B)False

Question 10

The second-ranked cost object is termed the incremental party and is allocated a proportionate share of common costs based on revenue.

Accepted Answer

A) True 
 B)False

Question 11

Answer the following question(s)using the information below:
Betty's Book and Music Store has two service departments, Warehouse and Data Centre.Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours.Data Centre Department costs of $75,000 are allocated based on the number of computer log-on hours.The costs of operating departments Music and Books are $125,000 and $150,000, respectively.Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
  
-Using the step-down method, what amount of Data Centre Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Accepted Answer

A) $58,671 
B) $33,333 
C) $46,296 
D) $41,667 
E) $0 
A) $58,671 
B) $33,333 
C) $46,296 
D) $41,667 
E) $0

Question 12

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs 
D) to measure income and assets for reporting to external parties 
E) to compute reimbursement 
A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs 
D) to measure income and assets for reporting to external parties 
E) to compute reimbursement

Question 13

Which of the following does NOT apply to support departments?

Accepted Answer

A) A support department is an operating department. 
B) Support departments create special accounting problems when they provide reciprocal support to each other. 
C) An example of a support department would be a personnel department. 
D) To obtain accurate product costs requires the inclusion of support department costs. 
E) Direct support costs are always traced, indirect support department costs are allocated. 
A) A support department is an operating department. 
B) Support departments create special accounting problems when they provide reciprocal support to each other. 
C) An example of a support department would be a personnel department. 
D) To obtain accurate product costs requires the inclusion of support department costs. 
E) Direct support costs are always traced, indirect support department costs are allocated.

Question 14

Answer the following question(s)using the information below.Joanne, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
Budgeted manufacturing overhead costs:
   Services furnished:
  
-Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

Accepted Answer

A) P = $150,000 - $80,000 (500/6,000)M 
B) P = (500/6,000)M 
C) P = $80,000 + (500/6,000)M 
D) P = $80,000 
E) P = $150,000 + (500/6,000)M 
A) P = $150,000 - $80,000 (500/6,000)M 
B) P = (500/6,000)M 
C) P = $80,000 + (500/6,000)M 
D) P = $80,000 
E) P = $150,000 + (500/6,000)M

Question 15

Answer the following question(s)using the information below:
The Bonawitz Corporation has a central copying facility.The copying facility has only two users, the Marketing Department and the Operations 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 Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies.
-If a dual-rate cost allocation method is used, what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

Accepted Answer

A) $30,245 
B) $29,945 
C) $28,500 
D) $28,200 
E) $24,600 
A) $30,245 
B) $29,945 
C) $28,500 
D) $28,200 
E) $24,600

Question 16

Use the information below to answer the following question(s).Low-Cost Rentals Ltd.incurred $60,000 of common fixed costs and $90,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used.   For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-To discourage unnecessary use of a support department, management might

Accepted Answer

A) not allocate any support department costs to user departments. 
B) allocate support department costs based upon user department usage. 
C) allocate a fixed amount of support department costs to each department regardless of use. 
D) issue memos on useful services provided by the support department. 
E) allocate only variable costs based on budgeted usage. 
A) not allocate any support department costs to user departments. 
B) allocate support department costs based upon user department usage. 
C) allocate a fixed amount of support department costs to each department regardless of use. 
D) issue memos on useful services provided by the support department. 
E) allocate only variable costs based on budgeted usage.

Question 17

Use the information below to answer the following question(s).We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used.   For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-The fixed and variable costs allocated to the Sauna Department are

Accepted Answer

A) $50,000 and $75,000, respectively. 
B) $50,000 and $60,000, respectively. 
C) $30,000 and $75,000, respectively. 
D) $30,000 and $50,000, respectively. 
E) $30,000 and $60,000 respectively. 
A) $50,000 and $75,000, respectively. 
B) $50,000 and $60,000, respectively. 
C) $30,000 and $75,000, respectively. 
D) $30,000 and $50,000, respectively. 
E) $30,000 and $60,000 respectively.

Question 18

Answer the following question(s)using the information below:
Betty's Book and Music Store has two service departments, Warehouse and Data Centre.Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours.Data Centre Department costs of $75,000 are allocated based on the number of computer log-on hours.The costs of operating departments Music and Books are $125,000 and $150,000, respectively.Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
  
-Using the step-down method, what amount of Data Centre Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Accepted Answer

A) $25,000 
B) $75,000 
C) $7,500 
D) $0 
E) $17,500 
A) $25,000 
B) $75,000 
C) $7,500 
D) $0 
E) $17,500

Question 19

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

Accepted Answer

A) True 
 B)False

Question 20

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

Accepted Answer

A) True 
 B)False

One of the purposes of allocating indirect costs is to justify costs or compute reimbursement amounts.

The direct allocation method provides key information for outsourcing decisions regarding support services.

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales, is an example of which criteria for cost allocation decisions?

Under which of the following methods of cost allocation is there no distinction between fixed and variable costs?

Resource consumption accounting (RCA)employs an allocation procedure akin to a dual-rate system.For each cost/resource pool, cost assignment rates

The single-rate cost allocation method provides better information for decision making than the dual-rate method.

The second-ranked cost object is termed the incremental party and is allocated a proportionate share of common costs based on revenue.

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

Which of the following does NOT apply to support departments?

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 14: Period Cost Allocation

One of the purposes of allocating indirect costs is to justify costs or compute reimbursement amounts.

The direct allocation method provides key information for outsourcing decisions regarding support services.

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales, is an example of which criteria for cost allocation decisions?

Under which of the following methods of cost allocation is there no distinction between fixed and variable costs?

Resource consumption accounting (RCA)employs an allocation procedure akin to a dual-rate system.For each cost/resource pool, cost assignment rates

The single-rate cost allocation method provides better information for decision making than the dual-rate method.

The second-ranked cost object is termed the incremental party and is allocated a proportionate share of common costs based on revenue.

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

Which of the following does NOT apply to support departments?

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters