Exam 14: Period Cost Allocation

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.

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: 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.

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

If a dual-rate cost-allocation method is used,what amount of copying facility costs will be budgeted for the Operations Department?

Which of the following is the first step in the cost-allocation decision process?

Which of the following methods of allocating support department costs is both simple and intuitive?

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 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)

Full product costing requires the recovery of all costs generated by all business functions in the value chain.

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 budgeted for the Marketing Department?

If the government wants to contract a very large scale project with significant uncertainty about what the final cost will be,often a cost-plus contract is awarded to attract qualified contractors who may otherwise not be willing to accept the risks inherent in a guaranteed bid price.

To discourage unnecessary use of a support department,management might

The direct allocation method provides key information for outsourcing decisions regarding support services.

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?

Which of the following describes the complete reciprocated cost?

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?

Under the incremental method of allocating common costs

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 step-down method,what amount of Warehouse Department cost will be allocated to Music Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Under the stand-alone method of allocating common costs

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?

Should a company allocate its corporate costs to divisions?