Exam 14: Period Cost Allocation

Answer the following questions using the information below: The Salmon Bay Corporation currently uses a manufacturing facility costing $200,000 per year; 80% of the facility's capacity is currently being used.A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%. -If the incremental method were used, what amount of cost would be allocated to the start-up business?

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 direct method, what amount of Warehouse Department costs will be allocated to Department Books?

Which of the following describes the complete reciprocated cost?

To discourage excessive use of a support department, management might

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 B using the direct method?

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 CD Division assuming the budgeted rate is used for variable costs and practical capacity is the allocation base for fixed costs?

Peterborough Controls Ltd.currently utilizes a manufacturing facility for $250,000 per year.The facility is used at 75 percent capacity.The shipping department has proposed a plan in which it would utilize the other 25 percent plant capacity for the company's shipping plus handling the shipping of several nearby businesses.The company's consulting firm estimated that the overall costs of maintaining the space would increase by 10 percent.The shipping manager is interested in the amount that would be allocated under the incremental method.

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

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 Barbell Department are

The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Lamp Division.The following data apply to the coming budget year: Budgeted costs of the operating the plant for 10,000 to 20,000 hours: Budgeted long-run usage per year: Assume that practical capacity is used to calculate the allocation rates.Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.Required: a.If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? b.For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs. c.If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? d.For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Answer the following questions using the information below: The Charmatz 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 costs of operating the copying facility for 400,000 to 600,000 copies: Budgeted long-run usage in copies per year: Budgeted amounts are used to calculate the allocation rates.Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. -If a single-rate cost allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs.

Answer the following question(s)using the information below: The Sturgeon Bay Corporation currently uses a manufacturing facility costing $400,000 per year; 80% of the facility's capacity is currently being used.A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%. -If the incremental method were used, what amount of cost would be allocated to the start-up business?

The single-rate method is when all indirect costs are combined in one cost pool and allocated to cost objects via a single rate per unit.

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 budgeted for the Operations Department?

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 encourage the sales department to focus on high-margin products

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 Maintenance Department 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?

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 Personnel Department costs will be allocated to Department B?

Which of the following criteria subsidizes poor performers at the expense of the best performers?

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. -The fixed and variable costs allocated to the Tools Department are

Hunt Company and Indio Company are noncompeting lines of business and use a common database for marketing purposes.The variable costs associated with accessing the database are readily identifiable and kept in separate cost pools that are charged to each user.The fixed costs of maintaining the database, however, cannot be identified by user on a cause-and-effect basis.These fixed costs for the next year are budgeted at $55,000.If Hunt does not use the database, the fixed costs to Indio are $48,000.An outside vendor offers to provide Hunt access to a comparable database for a fixed fee fo $60,000 per year plus variable costs of accessing the database.The same vendor offers to provide Indio access to that database for a fixed fee of $20,000 per year plus variable costs of accessing the database.Required: Compute how much of the $55,000 fixed costs of maintaining the database are charged to by each user: a.Under the stand-alone allocation method. b.Under the incremental allocation method, assuming Hunt Company is regarded as the primary user.