Exam 14: Period Cost Allocation

Benefits from using a well-designed cost allocation system are more evident than the costs.

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 Maintenance Department is allocated to Department B using the direct method?

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. -Assuming that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Barbell Department will be

Allowable cost is the cost that the parties to a contract agree to exclude from reimbursed costs.

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 of the following is a valid conclusion, in comparing the three allocation methods?

Fixed cost allocation rates should be determined using

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 Data Centre Department costs will be allocated to Department Music?

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 single-rate cost allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department?

User departments will be able to determine their allocated costs for each category in advance if budgeted usage is the allocation base.

Smith Company and Jones Company currently share an employee dining facility.Jones Company employs fewer people and believes that they should not be required to pay one-half of the $300,000 costs incurred for the facility.An independent consulting firm stipulated that Smith Company could receive the same services for $150,000 while Jones's employees could receive comparable services for $100,000.What will be Jones's allocated cost if the stand-alone method is used?

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 Large Plane Department?

The Product Data Center has been servicing the Struble Production Casting Department for five years.Beginning next year, the company is adding a Production Molding Department to compliment the materials produced by the Struble Production Casting Department.As a result, data center costs are expected to increase from $700,000 per year to $800,000 per year.The Production Molding Department will use 20% of the data center efforts.Required: a.Using the stand-alone cost-allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year. b.Using the incremental cost allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year.

Van Meter Company has substantial fluctuations in its production costs because of the seasonality of figs.Most fig growers have two crops a year, one in June and one in August.However, the company has been importing figs from southern hemisphere countries, which extends the supply to the months of December and February.Required: What would you recommend as the monthly allocation base for the service departments of Van Meter Company? State your assumed cost object.A conceptual answer is required, not an example, such as cartons of figs.

The Eco-Garden Corporation operates one central plant that has two divisions, the Lawnmower Division and the Weedwacker Division.The following data apply to the coming budget year: Budgeted costs of the operating the plant for 4,000 to 8,000 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 Lawnmower Division was 350 hours and the Weedwacker Division was 200 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 Lawnmower Division each month? For the Weedwacker 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 Lawnmower Division? To the Weedwacker 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 Lawnmower Division each month? For the Weedwacker 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 Lawnmower Division? To the Weedwacker Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Cutler Hammer currently utilizes a manufacturing facility for $200,000 per year.The facility is used at 70 percent capacity.The shipping department has proposed a plan in which it would utilize the other 30 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 12 percent.The shipping manager is interested in the amount that would be allocated under the incremental method.

The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually.Variable costs are incurred at the rate of $30 per maintenance-hour.The facility averages 40,000 maintenance-hours a year.Budgeted and actual hours per user for the year are as follows: Assume that budgeted maintenance-hours are used to calculate the allocation rates.Required: a.If a single-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department? b.If a single-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage? c.If a dual-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department? d.If a dual-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

Which purpose of cost allocation is used to decide on the selling price for a customized product or service?

Scarborough Sales, a real estate company specializing in apartment rentals and home sales, is having difficulty in gathering appropriate cost information for evaluating its operations.It owns several large apartment complexes and sells homes owned by builders or existing homeowners.As the company's new accountant you define cost by major activity.You use this information for allocating costs to cost objects.Also, cost pools are created for appropriate cost allocations.The owner of the company is interested in exactly what you have done, and why it appears to be working so smoothly.Required: Briefly state the four purposes for allocating costs to cost objects and give two examples of how each can be used for the real estate company.

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 A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

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 simpler product design