Exam 14: Period Cost Allocation

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

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.

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?

The cost of operating the quality control department of Ames Manufacturing includes $608,000 of fixed costs and $400,000 of variable costs.The department normally budgets 21,000 inspection hours a year.Two departments receive quality control checks,fabrication and assembly.Fabrication is budgeted at 12,000 hours a year,while assembly is budgeted the remainder. Required: a.In July,fabrication used 1,000 inspection hours and assembly used 800 hours.How much did each department receive in quality control costs assuming a single-rate is used based on budgeted hours? b.In August,fabrication used 1,200 inspection hours and assembly used 900 hours.How much did each department receive in quality control costs assuming a dual-rate is used with budgeted usage for fixed costs and actual usage for variable costs? c.Which method seems more appropriate in this case? Explain.

The use of budget capacity in the denominator rate for a fixed cost pool is preferable as it reduces the ability of managers to manipulate the allocation rate.

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 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 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 stand-alone method were used,what amount of cost would be allocated to the start-up business?

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

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.

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. 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?

Campaign Printing has two service departments,S1 and S2,and two production departments,P1 and P2.The data for April were as follows: Required: a.Set up algebraic equations in linear equation form for the service and production departments. b.Using the reciprocal method determine the reciprocated cost for each service department and allocate the reciprocated costs of each service department to the production departments.

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

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?

A disadvantage of allocating fixed costs using a budgeted rate and actual usage is that

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

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?

Which method allocates costs by explicitly including the mutual services rendered among all support departments?

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.