Exam 15: Allocation of Support-Department Costs, common Costs, and Revenues

Revenue allocation is required to determine the profitability of individual items within a bundled product.

Which of the following is a disadvantage of a dual-rate method?

Marvelous Motors is a small motor supply outlet that sells motors to companies that make various small motorized appliances.The fixed operating costs of the company are $300,000 per year.The controlling shareholder,interested in product profitability and pricing,wants all costs allocated to the motors and wants to review the company status on a quarterly basis.The shareholder is trying to determine whether the costs should be allocated each quarter based on the 25% of the annual fixed operating costs ($75,000)or by using an annual forecast budget to allocate the costs.The following information is provided for the operations of the company: Required: a.What amount of fixed operating costs are assigned to each motor by quarter when actual sales are used as the allocation base and $75,000 is allocated? b.How much fixed cost is recovered each quarter under requirement a.? c.What amount of fixed operating costs are assigned to each motor by quarter when forecast sales are used as the allocation base and the rate is calculated annually as part of the budgetary process? d.How much fixed cost is recovered each quarter under requirement c.? e.Which method seems more appropriate in this case? Explain.

Describe methods which may be used to allocate support costs within organizations containing multiple support departments.Discuss advantages and disadvantages of the various methods.

Under the dual-rate cost-allocation method,when fixed costs are allocated based on actual usage then ________.

All contracts with U.S.government agencies must comply with the cost accounting standards issued by the SEC.

Max's Movie Store encounters revenue-allocation decisions with its bundled product sales.Here,two or more of the movie videos are sold as a single package.Managers at Max's are keenly interested in individual product-profitability figures.Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows: Required: a.With selling prices as the weights,allocate the $25 packaged price of "All Three" to the three videos using the stand-alone revenue-allocation method. b.Allocate the $25 packaged price of "All Three" to the three types of videos using the incremental revenue-allocation method.Assume New Releases is the primary product,followed by Older Releases,and then Classics.

The cost-allocation method that allocates each support-department's costs to operating departments only is the direct method.

Which of the following statements is false with regards to departmental cost allocations?

Which of the following departments would not be considered a service or support department?

Emrald Corp currently uses a manufacturing facility costing $560,000 per year;90% of the facility's capacity is currently being used.A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 11%.If the incremental method were used,what amount of cost would be allocated to the start-up business?

Consider the following information attributed to the material management department Budgeted usage of materials-handling labor-hours 3500 Budgeted cost pools: Fixed costs $154,000 Variable costs $126,000 (3500 hours x $36 per hour) The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments.Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month,what would be the allocation rate and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round final answers to the nearest dollar. )

Which of the following is an example of a revenue object?

Goldfarb's Book and Music Store has two service departments,Warehouse and Data Center.Warehouse Department costs of $310,000 are allocated on the basis of budgeted warehouse-hours.Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours.The costs of operating departments Music and Books are $102,500 and $123,000,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 Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations. )

The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually.Variable costs are incurred at the rate of $30 per maintenance-hour.The facility averages 40,000 maintenance-hours a year.Budgeted and actual hours per user for 2017 are as follows: Assume that budgeted maintenance-hours are used to calculate the allocation rates. Required: a.If a single-rate cost-allocation method is used,what amount of maintenance cost will be budgeted for each department? b.If a single-rate cost-allocation method is used,what amount of maintenance cost will be allocated to each department based on actual usage? c.If a dual-rate cost-allocation method is used,what amount of maintenance cost will be budgeted for each department? d.If a dual-rate cost-allocation method is used,what amount of maintenance cost will be allocated to each department based on actual usage? Based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

Hugo,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: By Maintenance (budgeted labor-hours): By Personnel (Number of employees serviced): Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

When allocating the revenues between a bundled product offering,management judgement can be used in issuing revenue-allocation weights.

The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.

The issue of "allowable costs" is applicable in government cost-plus contracts.

Emrald Corp currently uses a manufacturing facility costing $520,000 per year;85% of the facility's capacity is currently being used.A start-up business has proposed a plan that would utilize the other 15% of the facility and increase the overall costs of maintaining the space by 12%.If the stand-alone method were used,what amount of cost would be allocated to the start-up business?