Question 1

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.

Accepted Answer

The answer of Broadway Department Store allocates the Personnel and...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) $53,412 
B) $43,660 
C) $46,640 
D) $46,588 
E) $56,313

Question 5

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

Accepted Answer

A) the direct allocation method 
B) the single-step allocation method 
C) the reciprocal allocation method 
D) the dual-rate method 
E) the step-down allocation method

Question 6

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?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and employees 
C) to determine employees' wages 
D) to measure income and assets for reporting to external parties 
E) to justify costs or compute reimbursements

Question 7

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

Accepted Answer

A) a personnel department 
B) an assigned department 
C) a support department 
D) a service department 
E) an operating department

Question 8

To discourage excessive use of a support department,management might

Accepted Answer

A) not allocate any costs of the support departments. 
B) allocate costs based on user department usage. 
C) allocate a fixed amount to each department regardless of use. 
D) expense fixed costs of support departments directly to the income statement. 
E) create special accounting records for the support department.

Question 9

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?

Accepted Answer

A) $412,766 
B) $321,898 
C) $196,898 
D) $191,053 
E) $184,132

Question 10

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

Accepted Answer

A) Actual rates let users know in advance what their costs are. 
B) When budgeted rates are used,users must wait till the end of the budget period to know what their costs are. 
C) With actual rates,a support department,rather than a user department,bears the risk of unfavourable cost variances. 
D) Budgeted rates based on user department estimates may lead to outsourcing needed work,rather than relying on an internal support department. 
E) Budgeted rates may help the manager of a support department to improve efficiency.

Question 11

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.

Accepted Answer

The answer of Gotham University offers only high-tech graduate-level programs.Gotham...

Question 12

Which cost allocation method differentiates between variable and fixed costs?

Accepted Answer

A) dual-rate method 
B) heterogeneous method 
C) single-rate method 
D) variable method 
E) fixed rate method

Question 13

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

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs 
D) to measure income and assets for reporting to external parties 
E) to compute reimbursement

Question 14

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?

Accepted Answer

The answer of Brandy has been manager of the downtown...

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) fixed method 
B) dual-rate method 
C) homogeneous method 
D) standard cost method 
E) single-rate method

Question 17

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?

Accepted Answer

A) DP = $75,000 + (600/4,700)PM 
B) DP = $75,000 + (3,500/16,700)PM 
C) DP = $75,000 × (600/4,800)+ $350,000 × (3,340/16,700) 
D) PM = $350,000 + (600/16,700)DP 
E) PM = $75,000 × (600/4,700)+ $350,000 × (3,340/16,700)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) $0;$1,400,000 
B) $0;$2,000,000 
C) $1,400,000;$600,000 
D) $700,000;$1,300,000 
E) $600,000;$1,400,000

Question 20

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

Accepted Answer

The answer of What is a "common cost"? What are...

Exam 14: Period Cost Allocation

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?

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?

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?

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

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