Exam 14: Period Cost Allocation

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.

An organization determines its allocation base depending upon which of the following factors?

A cost pool is a grouping of individual cost items.

Benefits of the single-rate method include

When using the causality criterion, cost drivers are selected as the cost allocation bases.

When all of a cost pool's individual activities have the same or similar relationships between the cost driver and the costs of the activity, it is considered

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?

Which of the following is true concerning cost allocation in a multi-product company?

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 provided 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

Use the information below to answer the following question(s). Data Source Media manufactures cassettes and CDs. Management is attempting to set the budget for the coming year. Two divisions (Cassette and CD) of the company utilize one plant location. The following data have been prepared for review. -What is the allocated cost to the two departments, 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 Departments used 1,750 and 200 hours, respectively.

The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.

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 stand-alone method.

Which of the following describes the complete reciprocated cost?

The cost pool is homogeneous if all included activities have the same or similar cause-and-effects or benefits received relationships between the cost driver and the costs of the activity.

Use the information below to answer the following question(s). John, 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 linear equations would represent the complete reciprocated cost of the Data Processing department?

Fixed costs

Answer the following questions 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 allocated to the Marketing Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

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 provided 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

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

Answer the following questions 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)