Exam 14: Period Cost Allocation

Broadway Department Store allocates the Personnel and Payroll Department's costs to the sales departments of Shoes,Automotive,and Clothing.Personnel and Payroll also provide services to each other.Personnel costs are allocated by number of employees,and payroll costs are allocated by gross payroll dollars.Costs and other information for January were as follows: Required: Prepare a schedule,which includes the total cost of operating the sales departments for January.Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.

Benefits from using a well-designed cost allocation system are more evident than the costs.

The stand-alone method of allocating common costs emphasizes fairness and equity among users.

What is the cost of the support departments allocated to Department A using the step-down method if the Personnel Department is allocated first?

Which method allows for partial recognition of the services rendered by support departments to other support departments?

To encourage the design of products that are simpler to manufacture or less costly to service,would be an example of which cost allocation purpose?

Which of the following could be described as a department that adds value to a product or service,which is observable by a customer?

To discourage excessive use of a support department,management might

What is the Capping Department's total cost if both service departments are allocated using the complete reciprocated cost method and their costs for the year were $375,000 for Plant Maintenance and $100,000 for Data Processing?

When choosing between using budgeted rates,and actual rates,which of the following is TRUE?

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: Use the direct method to allocate support costs to each of the two principal operating departments,Engineering and Computer Sciences.Prepare a schedule showing the support costs allocated to each department.

Which cost allocation method differentiates between variable and fixed costs?

Which purpose of cost allocation is used to decide on the selling price for a customized product or service?

Brandy has been manager of the downtown branch of General Bank for several years.During this time she has received very good annual evaluations for her management of the branch.However,during the current year (it is now July)she has been upset with the monthly performance report generated by the budgeting department at the home office.Her branch has been making steady progress with controlled growth during the year and she knows of no reason why the report has such widely fluctuating variances.One item that she suspects is causing some of the problem is that most of the costs of the bank are fixed,with each branch getting an allocation of home office expenses each month.The bank also has some branches which are fast growing and some of which are having operating difficulties. Required:From the information presented,what do you suggest as a possible cause of the reporting problems?

A support department adds value directly to a product or service,which is observable by the customer.

Under which of the following methods of cost allocation is there no distinction between fixed and variable costs?

Use the information below to answer the following question(s). The 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?

Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

Two entities,Cooper Company and Magic Company,share a common warehouse facility.Total costs for the facility are budgeted at $2,000,000.Accountants have estimated that if Cooper Company did not use the facility the cost incurred would be reduced by 30 percent.What amount of the budgeted cost should be allocated,respectively,to Cooper and Magic if the incremental allocation method is used? Assume that Magic is he primary party.

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?