Question 1

Which of the following illustrates a purpose for allocating costs to cost objects?

Accepted Answer

A) to provide information for economic decisions 
B) to reduce competition 
C) to determine employee benefit costs 
D) to defer income and reduce taxes payable 
E) to evaluate managers and employees 
A) to provide information for economic decisions 
B) to reduce competition 
C) to determine employee benefit costs 
D) to defer income and reduce taxes payable 
E) to evaluate managers and employees

Question 2

The step-down allocation method allows partial recognition of services rendered by support departments to other support departments.

Accepted Answer

A) True 
 B)False

Question 3

Broadway Department Store allocates the Personnel and Payroll Department's costs to the sales departments of Shoes, Automotive, and Clothing.Personnel and Payroll also provide services to each other.Personnel costs are allocated by number of employees, and payroll costs are allocated by gross payroll dollars.Costs and other information for January were as follows:
   Required:
Prepare a schedule, which includes the total cost of operating the sales departments for January.Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.

Accepted Answer

Personnel cost to payroll = 3/

Question 4

Should a company allocate its corporate costs to divisions?

Accepted Answer

Some companies allocate all corporate co

Question 5

Answer the following question(s)using the information below:
The Fancy Flier Airplane 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 6,000 technician hours and by the Small Plane Department was 6,500 technician hours.
-If a dual-rate cost allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department?

Accepted Answer

A) $1,057,500 
B) $763,750 
C) $705,000 
D) $822,500 
E) $897,500 
A) $1,057,500 
B) $763,750 
C) $705,000 
D) $822,500 
E) $897,500

Question 6

Use the information below to answer the following question(s).General Media manufactures cassettes and CDs in separate divisions utilizing one plant location.The following data have been prepared for review.  
-What is the allocated cost to the two General Media divisions, respectively, if budgeted usage is the base for fixed costs and actual usage is the base for variable costs? (Use dual-rate method.)Assume that the Cassette and CD Divisions used 1,750 and 200 hours, respectively.

Accepted Answer

A) $1,050,000; $120,000 
B) $1,787,240; $204,256 
C) $1,465,957; $214,043 
D) $2,000,126; $294,112 
E) $1,787,240; $254,043 
A) $1,050,000; $120,000 
B) $1,787,240; $204,256 
C) $1,465,957; $214,043 
D) $2,000,126; $294,112 
E) $1,787,240; $254,043

Question 7

Holiday Printing has two service departments, S1 and S2, and two production departments, P1 and P2.The data for June were as follows:
   Required:
a.Set up algebraic equations in linear equation form for the service and production departments.

Accepted Answer

a. @#IMG-DLM& b.S1 = $75,000 + [0.25 × ($100,000 +

Question 8

To encourage the design of products that are simpler to manufacture or less costly to service, would be an example of which cost allocation purpose?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and employees 
C) to determine employees' wages 
D) to measure income and assets for reporting to external parties 
E) to justify costs or compute reimbursements 
A) to provide information for economic decisions 
B) to motivate managers and employees 
C) to determine employees' wages 
D) to measure income and assets for reporting to external parties 
E) to justify costs or compute reimbursements

Question 9

Use the information below to answer the following question(s).Joe's Tire Company has two support departments, Personnel and Maintenance.The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $20,000 are allocated based on the number of employees.Costs of Departments A and B are $40,000 and $60,000, respectively.Data on standard service hours and number of employees are as follows:
  
-How much of the cost of the Personnel Department is allocated to Department A using the direct method?

Accepted Answer

A) $5,000 
B) $15,000 
C) $4,211 
D) $12,632 
E) $40,000 
A) $5,000 
B) $15,000 
C) $4,211 
D) $12,632 
E) $40,000

Question 10

Use the information below to answer the following question(s).Data Source Media manufactures cassettes and CDs in separate divisions utilizing one plant location.The following data have been prepared for review.  
-What is the total cost per hour of use for the Cassette Division assuming budgeted usage is the allocation base and a single-rate method is used?

Accepted Answer

A) $1,050.00 
B) $600.00 
C) $982.98 
D) $382.98 
E) $360.00 
A) $1,050.00 
B) $600.00 
C) $982.98 
D) $382.98 
E) $360.00

Question 11

When choosing between using budgeted rates, and actual rates, which of the following is TRUE?

Accepted Answer

A) Actual rates let users know in advance what their costs are. 
B) When budgeted rates are used, users must wait till the end of the budget period to know what their costs are. 
C) With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances. 
D) Budgeted rates based on user department estimates may lead to outsourcing needed work, rather than relying on an internal support department. 
E) Budgeted rates may help the manager of a support department to improve efficiency. 
A) Actual rates let users know in advance what their costs are. 
B) When budgeted rates are used, users must wait till the end of the budget period to know what their costs are. 
C) With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances. 
D) Budgeted rates based on user department estimates may lead to outsourcing needed work, rather than relying on an internal support department. 
E) Budgeted rates may help the manager of a support department to improve efficiency.

Question 12

Use the information below to answer the following question(s).Joe's Tire Company has two support departments, Personnel and Maintenance.The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $20,000 are allocated based on the number of employees.Costs of Departments A and B are $40,000 and $60,000, respectively.Data on standard service hours and number of employees are as follows:
  
-What is the cost of the support departments allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first?

Accepted Answer

A) $43,660 
B) $21,333 
C) $53,412 
D) $46,588 
E) $ 56,313 
A) $43,660 
B) $21,333 
C) $53,412 
D) $46,588 
E) $ 56,313

Question 13

Krum Lawn Equipment has five departments, of which Casting and Finishing are producing departments.Maintenance, Product Movement, and Inspection are service departments.The distribution of the service departments is as follows:
     Required:
Use the direct method to allocate the service departments' costs.Prepare a schedule showing the total costs allocated to each department.

Accepted Answer

@#IMG-DLM& Maintenan

Question 14

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.
-An advantage to using budgeted usage, rather than actual usage, for the allocation base is that

Accepted Answer

A) ASPE/IFRS requires it for comparability to previous years. 
B) variable costs are lower. 
C) management does not have to be accountable for actual costs since the system only deals with budgeted costs. 
D) it is consistent with a short-run time horizon. 
E) user divisions will know their allocated costs in advance. 
A) ASPE/IFRS requires it for comparability to previous years. 
B) variable costs are lower. 
C) management does not have to be accountable for actual costs since the system only deals with budgeted costs. 
D) it is consistent with a short-run time horizon. 
E) user divisions will know their allocated costs in advance.

Question 15

Answer the following questions using the information below:
Jake's Battery Company has two service departments, Maintenance and Personnel.Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours.Personnel Department costs of $80,000 are allocated based on the number of employees.The costs of operating departments A and B are $160,000 and $240,000, respectively.Data on budgeted maintenance-hours and number of employees are as follows:
  
-Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Accepted Answer

A) $64,000 
B) $85,333 
C) $114,667 
D) $128,000 
A) $64,000 
B) $85,333 
C) $114,667 
D) $128,000

Question 16

Use the information below to answer the following question(s).The owner of Hi-Tech Fiberglass Fabricators Inc.is interested in using the reciprocal allocation method.The following data from operations were collected for analysis.Budgeted manufacturing overhead costs:
   Service furnished:
By Plant Maintenance (budgeted labour hours)
   By Data Processing (budgeted computer time)
  
-What is the Capping Department's total cost if both service departments are allocated using the complete reciprocated cost method and their costs for the year were $375,000 for Plant Maintenance and $100,000 for Data Processing?

Accepted Answer

A) $412,766 
B) $321,898 
C) $196,898 
D) $191,053 
E) $184,132 
A) $412,766 
B) $321,898 
C) $196,898 
D) $191,053 
E) $184,132

Question 17

Use the information below to answer the following question(s).The owner of Hi-Tech Fiberglass Fabricators Inc.is interested in using the reciprocal allocation method.The following data from operations were collected for analysis.Budgeted manufacturing overhead costs:
   Service furnished:
By Plant Maintenance (budgeted labour hours)
   By Data Processing (budgeted computer time)
  
-What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing?

Accepted Answer

A) $112,275 and $74,468 
B) $131,250 and $84,375 
C) $281,250 and $12,500 
D) $337,500 and $200,000 
E) $337,500 and $12,500 
A) $112,275 and $74,468 
B) $131,250 and $84,375 
C) $281,250 and $12,500 
D) $337,500 and $200,000 
E) $337,500 and $12,500

Question 18

In a firm's value chain downstream costs are categorized as

Accepted Answer

A) customer service costs. 
B) production costs. 
C) design costs. 
D) manufacturing quality control costs. 
E) research and development costs. 
A) customer service costs. 
B) production costs. 
C) design costs. 
D) manufacturing quality control costs. 
E) research and development costs.

Question 19

Answer the following questions using the information below:
Jake's Battery Company has two service departments, Maintenance and Personnel.Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours.Personnel Department costs of $80,000 are allocated based on the number of employees.The costs of operating departments A and B are $160,000 and $240,000, respectively.Data on budgeted maintenance-hours and number of employees are as follows:
  
-Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

Accepted Answer

A) $96,000 
B) $128,000 
C) $156,000 
D) $192,000 
A) $96,000 
B) $128,000 
C) $156,000 
D) $192,000

Question 20

Use the information below to answer the following question(s).The owner of Hi-Tech Fiberglass Fabricators Inc.is interested in using the reciprocal allocation method.The following data from operations were collected for analysis.Budgeted manufacturing overhead costs:
   Service furnished:
By Plant Maintenance (budgeted labour hours)
   By Data Processing (budgeted computer time)
  
-Which method allows for partial recognition of the services rendered by support departments to other support departments?

Accepted Answer

A) the direct allocation method 
B) the single-step allocation method 
C) the reciprocal allocation method 
D) the dual-rate method 
E) the step-down allocation method 
A) the direct allocation method 
B) the single-step allocation method 
C) the reciprocal allocation method 
D) the dual-rate method 
E) the step-down allocation method

Which of the following illustrates a purpose for allocating costs to cost objects?

The step-down allocation method allows partial recognition of services rendered by support departments to other support departments.

Should a company allocate its corporate costs to divisions?

Holiday Printing has two service departments, S1 and S2, and two production departments, P1 and P2.The data for June were as follows: Required: a.Set up algebraic equations in linear equation form for the service and production departments.

To encourage the design of products that are simpler to manufacture or less costly to service, would be an example of which cost allocation purpose?

When choosing between using budgeted rates, and actual rates, which of the following is TRUE?

In a firm's value chain downstream costs are categorized as

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

Which of the following illustrates a purpose for allocating costs to cost objects?

The step-down allocation method allows partial recognition of services rendered by support departments to other support departments.

Should a company allocate its corporate costs to divisions?

Holiday Printing has two service departments, S1 and S2, and two production departments, P1 and P2.The data for June were as follows: Required: a.Set up algebraic equations in linear equation form for the service and production departments.

To encourage the design of products that are simpler to manufacture or less costly to service, would be an example of which cost allocation purpose?

When choosing between using budgeted rates, and actual rates, which of the following is TRUE?

In a firm's value chain downstream costs are categorized as

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