Exam 7: Allocating Costs of Support Departments and Joint Products

Hotchkiss Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows: What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

Carson Wood Products processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: What is the gross profit of No. 3 common if the constant gross margin percentage method is used?

If a support department's costs were budgeted to be $150,000 and actual costs incurred by the support department were $200,000, the total amount of the support department's costs that should be allocated to other departments is

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?

Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. Refer to Figure 7-7. What is the amount of joint costs allocated to Dulls using the constant gross margin percentage method?

Hibernation Company incurred $500,000 to manufacture the following products in a joint process: How much joint cost would be allocated to Product I based on the physical units method?

Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: What amount of joint costs will be allocated to first and second using the physical units method?

Figure 7-2 Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $34 per trip Fixed costs $143,360 The budgeted usage is given below: Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Refer to Figure 7-2. Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.

The three methods of allocating support center costs to producing departments are the direct, sequential, and reciprocal methods

FIGURE 7-4 Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are

Which of the following is NOT a major objective of allocation as identified by the IMA?

Which of the following departments is NOT a support department?

Which of the following cost categories would most likely use machine hours as its activity driver?

Which joint cost allocation method is described by the following statement? Joint cost is prorated to the products on the basis of each product's share of units.

Which of the following allocation methods assumes "step-down" interdepartmental services?

Which of the following methods allocates joint production costs based on the pounds of product produced?

Alliance Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $27,000 and $45,000, respectively. Data on standard service hours and number of employees are as follows: Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours. What is the overhead rate for Department Y assuming the direct method is used?

Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. Refer to Figure 7-7. What is the amount of joint costs allocated to Brights using the net realizable value method?

Which joint cost allocation method is described by the following statement? Overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage. Each product is then assigned the same cost of goods sold percentage.

Mainstream Corporation manufactures two products, I and II, from a joint process. A production run costs $20,000 and results in 500 units of I and 2,000 units of II. Both products must be processed past the split-off point, incurring separable costs of $5 per unit for I and $10 per unit for II. The market price is $25 for I and $20 for II. Required: