Question 1

The costs of designing and implementing sophisticated cost allocation systems are usually not very visible.

Accepted Answer

A) True 
 B)False

Question 2

John Peters is drafting the provisions of a cost-plus contract and is concerned with ironing out any possible misunderstandings during the life of the contract.What advice can you provide to reduce contract disputes over reimbursement amounts based on costs?

Accepted Answer

Disputes can be reduced by making the co

Question 3

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 incremental 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) $21,000 
A) $20,000 
B) $100,000 
C) $80,000 
D) $84,000 
E) $21,000

Question 4

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?

Accepted Answer

All costs that are affected by

Question 5

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 Maintenance Department costs will be allocated to Department B?

Accepted Answer

A) $96,000 
B) $128,000 
C) $156,000 
D) $192,000 
A) $96,000 
B) $128,000 
C) $156,000 
D) $192,000

Question 6

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 Warehouse Department costs will be allocated to Department Books?

Accepted Answer

A) $70,000 
B) $105,000 
C) $75,000 
D) $87,500 
E) $30,000 
A) $70,000 
B) $105,000 
C) $75,000 
D) $87,500 
E) $30,000

Question 7

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:
   
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.

Accepted Answer

The answer of The Eco-Garden Corporation operates one central plant...

Question 8

AAA Fence Company manufactures wireless and aluminium fences in a common manufacturing facility.The company has become aware of unusual discrepancies in the costs of its products which management cannot explain.It seems that the sales and related production of wireless fences are in a very consistent growth market and are easily predicted.However,the sales and related production of aluminium fences are very erratic.Management does not understand why the costs per unit of wireless fences change when the production level seldom changes.
Required:
a.After some investigation you determine that for the last two quarters,the common fixed cost of the manufacturing operation has been $800,000.For the first quarter 12,000 wireless and 13,000 aluminium units were produced,respectively.For the second quarter,12,000 wireless and 8,000 aluminium units were produced,respectively.What were the total cost per product and the cost per unit of each product in each quarter when production units is the allocation basis?
b.After studying the results of the above computations you decide to use the company's average quarterly production of 12,000 wireless and 10,500 aluminium units as the allocation base,respectively.What are the total cost per product and the cost per unit per quarter for each product when average production is used?
c.Which allocation base do you recommend,and why?

Accepted Answer

a.
First quarter:
Wireless Fence:
Alloca

Question 9

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?

Accepted Answer

A) $1,057,500 
B) $822,500 
C) $1,880,000 
D) $1,600,000 
E) $982,500 
A) $1,057,500 
B) $822,500 
C) $1,880,000 
D) $1,600,000 
E) $982,500

Question 10

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)

Accepted Answer

A) $64,000 
B) $85,333 
C) $114,667 
D) $128,000 
A) $64,000 
B) $85,333 
C) $114,667 
D) $128,000

Question 11

Indirect costs typically constitute a large percentage of the costs assigned to cost objects.

Accepted Answer

A) True 
 B)False

Question 12

The method that allocates costs in each cost pool using the same rate per unit is known as the

Accepted Answer

A) incremental cost allocation method. 
B) reciprocal cost allocation method. 
C) single-rate cost allocation method. 
D) dual-rate cost allocation method. 
E) homogeneous cost allocation method. 
A) incremental cost allocation method. 
B) reciprocal cost allocation method. 
C) single-rate cost allocation method. 
D) dual-rate cost allocation method. 
E) homogeneous cost allocation method.

Question 13

Barrel Company's power plant provides electricity for its two operating departments,A and B.The year 2015 budget for the power plant shows:
   
Required:
a.Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b.Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c.From the standpoint of Departments A and B,what are the two main benefits of the dual-rate method?
d.Calculate the variable overhead efficiency variances for each department.Who would be the appropriate person(s)to provide information on the causes of these variances?

Accepted Answer

Budgeted fixed rate = $107,200

Question 14

Gotham University offers only high-tech graduate-level programs.Gotham has two principal operating departments,Engineering and Computer Sciences,and two support departments,Facility and Technology Maintenance and Enrollment Services.The base used to allocate facility and technology maintenance is budgeted total maintenance hours.The base used to allocate enrollment services is number of credit hours for a department.The Facility and Technology Maintenance budget is $350,000,while the Enrollment Services budget is $950,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
   
Required:
Prepare a schedule which allocates service department costs using the step-down method with the sequence of allocation based on the highest-percentage support concept.Compute the total amount of support costs allocated to each of the two principal operating departments,Engineering and Computer Sciences.

Accepted Answer

F&T Maintenance provided to enrollment s

Question 15

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales,is an example of which criteria for cost allocation decisions?

Accepted Answer

A) ability to bear 
B) benefits expended 
C) causality 
D) fairness and equity 
E) benefit received 
A) ability to bear 
B) benefits expended 
C) causality 
D) fairness and equity 
E) benefit received

Question 16

Benefits of the single-rate method include

Accepted Answer

A) the low cost of implementation. 
B) fixed costs that are transformed into variable costs for user decision making. 
C) signals regarding how variable and fixed costs behave differently. 
D) information that leads to outsourcing decisions that benefit the organization as a whole. 
E) there is a stronger cause and effect relationship. 
A) the low cost of implementation. 
B) fixed costs that are transformed into variable costs for user decision making. 
C) signals regarding how variable and fixed costs behave differently. 
D) information that leads to outsourcing decisions that benefit the organization as a whole. 
E) there is a stronger cause and effect relationship.

Question 17

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 dual-rate cost allocation method is used,what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

Accepted Answer

A) $30,245 
B) $29,945 
C) $28,500 
D) $28,200 
E) $24,600 
A) $30,245 
B) $29,945 
C) $28,500 
D) $28,200 
E) $24,600

Question 18

The allocation of one particular cost must satisfy all four justifications of cost allocation.

Accepted Answer

A) True 
 B)False

Question 19

Deciding whether to make a component part or to purchase it,would be an example of which cost allocation purpose?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers 
C) to determine employee's wages 
D) to measure income and assets for reporting to external parties 
E) to motivate employees 
A) to provide information for economic decisions 
B) to motivate managers 
C) to determine employee's wages 
D) to measure income and assets for reporting to external parties 
E) to motivate employees

Question 20

Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment.The fixed operating costs of the company are $5,000 per month.The controlling shareholder,interested in product profitability and pricing,wants all costs allocated to either the burgers or the hot dogs.The following information is provided for the operations of the company:
   
Required:
a.What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b.Hot dog sales for January and February remained constant.Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not.Comment on any other observations.

Accepted Answer

a.
 @#IMG-DLM& 
b.Even though hot dog sales remain

The costs of designing and implementing sophisticated cost allocation systems are usually not very visible.

John Peters is drafting the provisions of a cost-plus contract and is concerned with ironing out any possible misunderstandings during the life of the contract.What advice can you provide to reduce contract disputes over reimbursement amounts based on costs?

Indirect costs typically constitute a large percentage of the costs assigned to cost objects.

The method that allocates costs in each cost pool using the same rate per unit is known as the

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales,is an example of which criteria for cost allocation decisions?

Benefits of the single-rate method include

The allocation of one particular cost must satisfy all four justifications of cost allocation.

Deciding whether to make a component part or to purchase it,would be an example of which cost allocation purpose?

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 costs of designing and implementing sophisticated cost allocation systems are usually not very visible.

John Peters is drafting the provisions of a cost-plus contract and is concerned with ironing out any possible misunderstandings during the life of the contract.What advice can you provide to reduce contract disputes over reimbursement amounts based on costs?

Indirect costs typically constitute a large percentage of the costs assigned to cost objects.

The method that allocates costs in each cost pool using the same rate per unit is known as the

The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales,is an example of which criteria for cost allocation decisions?

Benefits of the single-rate method include

The allocation of one particular cost must satisfy all four justifications of cost allocation.

Deciding whether to make a component part or to purchase it,would be an example of which cost allocation purpose?

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