Question 1

The step-down allocation method

Accepted Answer

A) typically begins with the support department that provides the highest percentage of its total services to other support departments. 
B) recognizes the total amount of services that support departments provide to each other. 
C) allocates complete reciprocated costs. 
D) offers key input for outsourcing decisions. 
E) allocates support department costs to production departments only. 
A) typically begins with the support department that provides the highest percentage of its total services to other support departments. 
B) recognizes the total amount of services that support departments provide to each other. 
C) allocates complete reciprocated costs. 
D) offers key input for outsourcing decisions. 
E) allocates support department costs to production departments only.

Question 2

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

Accepted Answer

A) True 
 B)False

Question 3

John Ebert,a graduating student at a university in Calgary,received an invitation to visit a prospective employer in Halifax.A few days later,he received an invitation from a prospective employer in Toronto.He decided to combine his visits,travelling from Calgary to Halifax,Halifax to Toronto,and Toronto to Calgary.
Ebert received job offers from both companies.On his return,he decided to accept the offer in Toronto.He was puzzled as to how to allocate his travel costs between the two employers.He gathered the following data:
   
Ebert paid $1,900 for his three-leg flight (Calgary to Halifax,Halifax to Toronto,Toronto to Calgary).In addition,he paid $30 for a limousine from his home to Calgary Airport and another $30 for a limousine from Calgary Airport to his home when he returned.
Required:
a.Allocate the $1,900 airfare between the employers in Halifax and Toronto using both the stand-alone and incremental methods?
b.How would you allocate the $60 limousine fare?

Accepted Answer

1.Allocation of the $1,900 airfare: Alte

Question 4

Which of the following departments is least likely to be a support department for a boat manufacturing company?

Accepted Answer

A) personnel 
B) moulding and assembly 
C) data processing 
D) accounting 
E) purchasing 
A) personnel 
B) moulding and assembly 
C) data processing 
D) accounting 
E) purchasing

Question 5

Use the information below to answer the following question(s).
General Media manufactures cassettes and CDs in separate divisions utilizing one plant location.The following data have been prepared for review.
  
-What is the allocated cost to the two General Media divisions,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 Divisions used 1,750 and 200 hours,respectively.

Accepted Answer

A) $1,050,000;$120,000 
B) $1,787,240;$204,256 
C) $1,465,957;$214,043 
D) $2,000,126;$294,112 
E) $1,787,240;$254,043 
A) $1,050,000;$120,000 
B) $1,787,240;$204,256 
C) $1,465,957;$214,043 
D) $2,000,126;$294,112 
E) $1,787,240;$254,043

Question 6

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

Accepted Answer

A) True 
 B)False

Question 7

If one is willing to put in the time and expense,it is always possible to identify the specific cause-and-effect relationship needed for a cost allocation base.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

The answer of Hunt Company and Indio Company are noncompeting...

Question 9

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

Accepted Answer

A) $50,000 and $75,000,respectively. 
B) $50,000 and $60,000,respectively. 
C) $30,000 and $75,000,respectively. 
D) $30,000 and $60,000,respectively. 
E) $30,000 and $50,000 respectively. 
A) $50,000 and $75,000,respectively. 
B) $50,000 and $60,000,respectively. 
C) $30,000 and $75,000,respectively. 
D) $30,000 and $60,000,respectively. 
E) $30,000 and $50,000 respectively.

Question 10

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

Accepted Answer

A) $20,000 
B) $100,000 
C) $80,000 
D) $84,000 
E) $67,200 
A) $20,000 
B) $100,000 
C) $80,000 
D) $84,000 
E) $67,200

Question 11

What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing?

Accepted Answer

A) $112,275 and $74,468 
B) $131,250 and $84,375 
C) $281,250 and $12,500 
D) $337,500 and $200,000 
E) $337,500 and $12,500 
A) $112,275 and $74,468 
B) $131,250 and $84,375 
C) $281,250 and $12,500 
D) $337,500 and $200,000 
E) $337,500 and $12,500

Question 12

When budgeted cost allocation rates are used,managers of the supplier division are motivated to improve efficiency.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) Where the indirect costs are variable and each product is assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
B) Where the indirect costs are fixed and each product is assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
C) Where the indirect costs are variable and each product is not assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
D) Where the indirect costs are fixed and each product is not assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
E) Where the indirect costs are fixed and the products are produced jointly,it is possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred. 
A) Where the indirect costs are variable and each product is assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
B) Where the indirect costs are fixed and each product is assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
C) Where the indirect costs are variable and each product is not assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
D) Where the indirect costs are fixed and each product is not assembled sequentially,the causality criterion can guide the choice of a cost allocation base. 
E) Where the indirect costs are fixed and the products are produced jointly,it is possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred.

Question 15

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

Accepted Answer

A) $30,000 and $50,000,respectively. 
B) $30,000 and $60,000,respectively. 
C) $30,000 and $75,000 respectively. 
D) $40,000 and $60,000,respectively. 
E) $60,000 and $40,000,respectively. 
A) $30,000 and $50,000,respectively. 
B) $30,000 and $60,000,respectively. 
C) $30,000 and $75,000 respectively. 
D) $40,000 and $60,000,respectively. 
E) $60,000 and $40,000,respectively.

Question 16

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 allocated to the Marketing Department? Assume actual usage is used to allocate copying costs.

Accepted Answer

A) $8,400 
B) $9,000 
C) $6,000 
D) $4,800 
E) $6,655 
A) $8,400 
B) $9,000 
C) $6,000 
D) $4,800 
E) $6,655

Question 17

Landmark Systems Inc.designs and manufactures global positioning navigation systems for all-terrain vehicles and water craft.It has two support departments: Design and Engineering;and,two production departments,Vehicle Systems and Water Craft Systems.
The budgeted level of service relationships at the start of the year was:
   
Landmark Systems Inc.collects fixed costs and variable costs of each support department in separate pools.The budgeted costs for the year were:
   
Support department pools are combined by cost behavior for allocation purposes.
Production statistics (actual)are as follows:
   
Required:
a.Allocate the support department fixed costs using the dual-rate method.The company policy is to use design and engineering hours as the allocation base for variable costs;and,units produced for fixed costs.(round to the nearest cent)
b.Allocate the support department fixed costs using the reciprocal method.
c.Which method is preferable? Justify your answer.

Accepted Answer

a.Dual-rate method
 @#IMG-DLM& 
b.Recipr

Question 18

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.

Accepted Answer

a.Struble Production Casting Department

Question 19

Which of the following illustrates a purpose for allocating costs to cost objects?

Accepted Answer

A) to provide information for economic decisions 
B) to reduce competition 
C) to determine employee benefit costs 
D) to defer income and reduce taxes payable 
E) to evaluate managers and employees 
A) to provide information for economic decisions 
B) to reduce competition 
C) to determine employee benefit costs 
D) to defer income and reduce taxes payable 
E) to evaluate managers and employees

Question 20

In a firm's value chain upstream costs are categorized as

Accepted Answer

A) customer service costs. 
B) production costs. 
C) design costs. 
D) marketing costs. 
E) distribution costs. 
A) customer service costs. 
B) production costs. 
C) design costs. 
D) marketing costs. 
E) distribution costs.

The step-down allocation method

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

Which of the following departments is least likely to be a support department for a boat manufacturing company?

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

If one is willing to put in the time and expense,it is always possible to identify the specific cause-and-effect relationship needed for a cost allocation base.

What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing?

When budgeted cost allocation rates are used,managers of the supplier division are motivated to improve efficiency.

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

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

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

Which of the following illustrates a purpose for allocating costs to cost objects?

In a firm's value chain upstream costs are categorized as

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 14: Period Cost Allocation

The step-down allocation method

The incremental common cost allocation method requires that one user be viewed as primary and other users as incremental.

Which of the following departments is least likely to be a support department for a boat manufacturing company?

The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.

If one is willing to put in the time and expense,it is always possible to identify the specific cause-and-effect relationship needed for a cost allocation base.

What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing?

When budgeted cost allocation rates are used,managers of the supplier division are motivated to improve efficiency.

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

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

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

Which of the following illustrates a purpose for allocating costs to cost objects?

In a firm's value chain upstream costs are categorized as

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters