Deck 12: Cost Allocation

Question 1

Type 3 allocations are cost that flow from:

A) the accounting system to an organizational unit
B) the product to the customer
C) one organizational unit to another
D) one organizational unit to the product

Answer 1

D

Question 2

The preferred cost drivers for fixed- cost pools and variable- cost pools are .

A) capacity available and capacity available, respectively
B) capacity used and capacity used, respectively
C) capacity used and capacity available, respectively
D) capacity available and capacity used, respectively

Answer 2

D

Question 3

The use of budgeted service department cost rates protects using departments from:

A) service department efficiencies
B) service outages
C) price fluctuations
D) All of these answers are correct.

Answer 3

C

Question 4

is not a type of cost allocation.

A) Reallocation of costs from production departments to service departments
B) Allocation of costs to the appropriate organizational unit
C) Reallocation of costs from service departments to production departments
D) Allocation of costs of a particular organizational unit to products or services

Question 5

Sparrow Company processes copper ore into two products, C and U. The ore costs $5 per pound and conversion costs are $15 per pound. Sparrow Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore. C sells for $30 per pound and U sells for $40 per pound. Assuming the relative- sales- value method of allocating joint costs, the amount of joint cost allocated to product U would be:

A) $0
B) $685,714
C) $480,000
D) $400,000

Question 6

Joint costs are incurred:

A) before the production process is started
B) after the process- further decision
C) before individual products are separately identified
D) after the split- off point but before the process- further decision

Question 7

Steve Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\\text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$ If the direct method is used to allocate costs, the total cost of the Finishing Department after allocation would be:

A) $54,000
B) $277,000
C) $48,000
D) $175,000

Question 8

Roadrunner Company processes copper ore into two products, C and U. The ore costs $5 per pound and conversion costs are $15 per pound. Roadrunner Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore. C sells for $30 per pound and U sells for $40 per pound. Assuming the relative- sales- value method of allocating joint costs, the amount of joint cost allocated to product C would be:

A) $720,000
B) $400,000
C) $800,000
D) $514,286

Question 9

should be used to allocate variable costs.

A) Budgeted unit rate x actual units used
B) Budgeted unit rate x total budgeted units planned to be used
C) Actual unit rate x total budgeted units planned to be used
D) Actual unit rate x actual units used

Question 10

McGovern Company has two departments, Get and Go. Relevant information is presented below: $\begin{array}{lll}&\text { Get } & \text { Go } \\\text { Budgeted Sales } & \$ 400,000 & \$ 2,000,000 \\\text { Actual Sales } & \$ 300,000 & \$ 2,100,000\end{array}$ If the total advertising expense is $300,000 and it is allocated on the basis of sales using the preferred method, then the amount allocated to the Get Department should be:

A) $262,500
B) $ 50,000
C) $250,000
D) $ 37,500

Question 11

Riggs Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: $\begin{array}{lll}&\text { Mixing }&\text { Finishing }\\\text { Long-run capacity available }{ }^{*}&18,000&12,000\\\text { Budgeted } & 12,000 & 10,500 \\\text { Actual }^{*} & 15,000 & 9,000\\\text { *in labor hours }\end{array}$ Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of fixed maintenance costs allocated to the Finishing Department should be:

A) $14,000
B) $18,000
C) $11,250
D) $12,000

Question 12

Poodle Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $\begin{array}{lll}&&\text{Sales Value at }\\\text { Product }&\text { Units Produced }&\text { Split-off }\\\hline X & 5,000 & \$ 70,000 \\Y & 3,000 & \$ 30,000 \\Z & 2,000 & \$ 100,000\end{array}$ Assuming the physical- units method of allocating joint costs, the amount of joint costs allocated to product Y would be:

A) $75,000
B) $37,500
C) $250,000
D) $30,000

Question 13

Carter Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $\begin{array}{llll}& \text { Number of } & \text { Number of } & \text { Number of } \\\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$ is the total amount of overhead costs assigned to the deluxe model assuming traditional costing and applying overhead costs based on direct labor hours is used.

A) $33,375
B) $26,625
C) $22,500
D) $37,500

Question 14

Robin Company processes copper ore into two products, C and U. The ore costs $5 per pound and conversion costs are $15 per pound. Robin Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore. C sells for $30 per pound and U sells for $40 per pound. Suppose that C cannot be sold at the split- off point. Instead it must be processed further at a cost of $100,000, after which it can be sold for $45 per pound. The amount of joint cost allocated to product C would be:

A) $384,000
B) $816,000
C) $720,000
D) $800,000

Question 15

Allocating fixed costs on the basis of long- range plans may inadvertently encourage managers to:

A) underutilize available capacity
B) underestimate planned usage
C) overestimate planned cost
D) overestimate planned usage

Question 16

Buenos Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } 16 & 24 & 48 & 64\end{array}$$ If the direct method is used to allocate costs, then the amount of overhead allocated from Personnel to Finishing would be:

A) $16,800
B) $14,147
C) $33,600
D) $19,200

Question 17

recognizes that some service departments support the activities in the service departments as well as those in production departments.

A) The direct method
B) The indirect method
C) The step- up method
D) The step- down method

Question 18

Roller Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$$ If the step- down method is used to allocate costs and the Personnel Department is allocated first, then the cost of the Finishing Department after allocation would be:

A) $277,000
B) $279,250
C) $275,500
D) $175,000

Question 19

Costs are allocated for all the following purposes except to:

A) obtain reimbursement
B) compute income and asset valuation
C) predict the economic effects of planning and control decisions
D) determine inventory levels

Question 20

Lassie Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $\begin{array}{lll}&&\text { Sales Value at }\\\text { Product }&\text { Units Produced }&\text { Split-off }\\\mathrm{X} & \mathbf{5 , 0 0 0} & \$ 70,000 \\\mathrm{Y} & \mathbf{3 , 0 0 0} & \$ 30,000 \\\mathrm{Z} & \mathbf{2 , 0 0 0} & \$ 100,000\end{array}$ Assuming the physical- units method of allocating joint costs, the amount of joint costs allocated to product X would be:

A) $70,000
B) $125,000
C) $250,000
D) $87,500

Question 21

Reagan Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$$ is the total amount of overhead costs assigned to the deluxe model assuming activity- based costing is used.

A) $37,500
B) $26,625
C) $33,375
D) $22,500

Question 22

The preferred guidelines for allocating service department costs include:

A) establishing part or all of the details regarding cost allocation in advance of rendering the service
B) evaluating performance using allocated costs for each service department
C) allocating variable- and fixed- cost pools simultaneously
D) identifying the direct and indirect costs

Question 23

Costs are accumulated in traditional and ABC systems by .

A) activities and organizational units, respectively
B) activities and activities, respectively
C) organizational units and organizational units, respectively
D) organizational units and activities, respectively

Question 24

Martin Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 20 & 15 & 375 \\\text { Deluxe } & 30 & 45 & 225 \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000\end{array}$$ If a traditional costing system is used, is the overall overhead rate using direct labor hours.

A) $150
B) $117
C) $60
D) $500

Question 25

Hola Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lclll}\text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square foot age } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees }& 16 & 24 & 48 & 64\end{array}$ If the direct method is used to allocate costs, then the cost of the amount of overhead allocated from Maintenance to Mixing would be:

A) $50,400
B) $20,160
C) $28,800
D) $25,200

Question 26

Imelda Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } &16 & 24 & 48 & 64\end{array}$$ If the direct method is used to allocate costs, then the total cost of the Maintenance Department after the Personnel Department cost allocation would be:

A) $54,600
B) $53,939
C) $50,400
D) $70,000

Question 27

Cost allocation base refers to the:

A) total allocated costs
B) cost objectives
C) cost driver
D) total costs to be allocated

Question 28

A by- product:

A) is individually identifiable before the split- off point
B) has relatively insignificant total sales value
C) receives a portion of allocated separable costs
D) is treated like a joint product

Question 29

Australia Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: $$\begin{array}{l}\begin{array} { l l l } & \text { Mixing } & \text { Finishing } \\\text { Long-run capacity av ail able* } & 18,000 & 12,000 \\\text { Budgeted } & 12,000 & 10,500 \\\text { Actual } ^ { * } & 15,000 & 9,000\end{array}\\\text { *in labor hours }\end{array}$$ Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of variable maintenance costs allocated to the Finishing Department should be:

A) $36,000
B) $37,500
C) $48,000
D) $42,000

Question 30

Cleveland College recently leased a photocopy machine for $1,500 per month plus $0.04 per copy. Additional variable operating costs were $0.02 per copy. Cleveland College estimated it would produce a total of 30,000 copies per month. The Physics Department estimated it would produce 6,000 copies, but actually produced only 4,000 copies. If fixed and variable cost pools are allocated separately, then the amount of fixed costs allocated to the Physics Department should be:

A) $360
B) $300
C) $200
D) $240

Question 31

Type 1 allocations are costs that flow from:

A) the product to the customer
B) one organizational unit to the product
C) the accounting system to an organizational unit
D) one organizational unit to another

Question 32

Collie Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $\begin{array}{lll}&&\text { Sales } V \text { alue at }\\\text { Product } & \text { Units Produced } & \text { Split- off } \\X & 5,000 & \$ 70,000 \\Y & 3,000 & \$ 30,000 \\Z & 2,000 & \$ 100,000\end{array}$ Assuming the relative- sales- value method of allocating joint costs, the amount of joint costs allocated to product Z would be:

A) $50,000
B) $100,000
C) $250,000
D) $125,000

Question 33

is a method for allocating service department costs that ignores other service department's costs when any given service department's costs are allocated to the revenue- producing departments.

A) The step- down method
B) The direct method
C) The indirect method
D) The step- up method

Question 34

is not likely to be a cost driver.

A) A cost accountant's labor hours
B) Product inspections
C) Production orders
D) Material requisitions

Question 35

Doberman Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $$\begin{array}{l}&&\text { Sales } V \text { alue at }\\\text { Product } & \text { Units Produced } & \text { Split- off } \\\mathrm{X} & \mathbf{5 , 0 0 0} & \$ 70,000 \\\mathrm{Y} & 3,000 & \$ 30,000 \\\mathrm{Z} & 2,000 & \$ 100,000\end{array}$$ Assuming the relative- sales- value method of allocating joint costs, the amount of joint costs allocated to product Y would be:

A) $37,500
B) $250,000
C) $30,000
D) $75,000

Question 36

Kennedy Company has two departments, Hot and Cold. Relevant information is presented below: $\begin{array}{lll}&\text { Hot }&\text { Cold }\\\text { Square footage } & 1,500 & 4,500 \\\text { Number of employees } & 280 & 120\end{array}$ If total payroll processing costs are $24,000 and they are allocated on the basis of number of employees, the amount allocated to the Hot Department should be:

A) $7,200
B) $4,000
C) $16,800
D) $6,000

Question 37

Spaniel Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $$\begin{array}{l}\begin{array} { l l l } &&\text { Sales Value at }\\\text { Product } & \text { Units Produced } & \text { Split- off } \\\text { X } & 5,000 & \$ 70,000 \\\text { Y } & 3,000 & \$ 30,000 \\\text { Z } & 2,000 & \$ 100,000\end{array}\end{array}$$ Assuming the relative- sales- value method of allocating joint costs, the amount of joint costs allocated to product X would be:

A) $87,500
B) $125,000
C) $70,000
D) $250,000

Question 38

Kenneth Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\\text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$ If the step- down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Finishing is:

A) $105,000
B) $42,000
C) $31,500
D) $72,000

Question 39

Type 2 allocations are cost that flow from:

A) the product to the customer
B) one organizational unit to another
C) one organizational unit to the product
D) the accounting system to an organizational unit

Question 40

Robert Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\\text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Mixing is:

A) $63,000
B) $42,750
C) $36,000
D) $42,000

Question 41

Ranger Company produces three products from a joint process. Products Hee and Haw are considered main products. Product Cims is a by- product. Joint processing costs should be allocated to:

A) Cims and Haw
B) Hee and Cims
C) Hee and Haw
D) Hee, Haw, and Cims

Question 42

Laugh Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($70,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 20 & 15 & 375 \\\text { Deluxe } & 30 & 45 & 225 \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000\end{array}$$ If activity- based costing is used, is the overhead rate per component.

A) $117
B) $500
C) $600
D) $60

Question 43

In the step- down method, the first service department in the sequence is the one that renders the:

A) least service to all other service departments
B) least service to all producing departments
C) most service to all producing departments
D) most service to all other service departments

Question 44

Rowan Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($70,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & \mathbf{2 0} & \mathbf{1 5} & 375 \\\text { Deluxe } & 30 & 45 & 225 \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000\end{array}$$ If activity- based costing is used, is the pool overhead rate per direct labor hour.

A) $117
B) $150
C) $15
D) $50

Question 45

Parma College recently leased a photocopy machine for $1,500 per month plus $0.04 per copy. Additional variable operating costs were $0.02 per copy. Parma College estimated it would produce a total of 30,000 copies per month. The Physics Department estimated it would produce 6,000 copies, but actually produced only 4,000 copies. If Parma College uses a predetermined rate per copy, then would be allocated to the Physics Department.

A) $660
B) $540
C) $440
D) $240

Question 46

Johnson Company has two departments, Arrive and Go. Relevant information is presented below: $$\begin{array} { l l l } & \text { Arrive } & \text { G } 0 \\\text { Budgeted Sales } & \$ 400,000 & \$ 2,000,000 \\\text { Actual Sales } & \$ 300,000 & \$ 2,100,000\end{array}$$ Total advertising expense is $300,000. If the allocation base is changed from budgeted sales to actual sales, the amount allocated to the Arrive Department will:

A) increase by $12,500
B) decrease by $12,500
C) decrease by $25,000
D) increase by $25,000

Question 47

Braveheart Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: $$\begin{array}{l}& \text { Mixing } & \text { Finishing } \\\text { Long-run capacity available }{ }^{*} & 18,000 & 12,000 \\\text { Budgeted }^{*} & 12,000 & 10,500 \\\text { Actual }^{*} & 15,000 & 9,000\\\text { *in labor hours }\end{array}$$ Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of variable maintenance costs allocated to the Mixing Department should be:

A) $48,000
B) $62,500
C) $60,000
D) $72,000

Question 48

Reciprocal services are services provided by a service department to:

A) another service department
B) external customers
C) a producing department
D) All of these answers are correct.

Question 49

Cost application refers to costs allocated to:

A) revenue- producing products or services
B) service departments only
C) revenue- producing departments only
D) both service departments and revenue- producing departments

Question 50

Dachshund Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: $\begin{array}{lll}&&\text { Sales } V \text { alue at }\\\text { Product } & \text { Units Produced } & \text { Split- off } \\\mathrm{X} & \mathbf{5 , 0 0 0} & \$ 70,000 \\\mathrm{Y} & 3,000 & \$ 30,000 \\\mathrm{Z} & 2,000 & \$ 100,000\end{array}$ Assuming the physical- units method of allocating joint costs, the amount of joint costs allocated to product Z would be:

A) $50,000
B) $250,000
C) $125,000
D) $75,000

Question 51

is a traditional way of allocating joint costs to products.

A) Indirect method
B) Direct method
C) ABC method
D) Physical units

Question 52

is not likely to be an activity in an activity- based costing system.

A) Accounting
B) Inspection
C) Assembly
D) Materials handling

Question 53

Tambien Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } 16 & 24 & 48 & 64\end{array}$$ If the step- down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Personnel is:

A) $6,300
B) $5,040
C) $0
D) $6,825

Question 54

Juan Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } &16 & 24 & 48 & 64\end{array}$$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Personnel is:

A) $16,800
B) $0
C) $6,300
D) $5,040

Question 55

Eastman Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\\text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$ If the step- down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Mixing is:

A) $78,000
B) $58,500
C) $31,500
D) $63,000

Question 56

Williams Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\\text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\\text { Square footage } & 800 & 400 & 1,600 & 1,200 \\\text { Number of employees } &8 & 12 & 24 & 32\end{array}$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Finishing is:

A) $57,000
B) $31,500
C) $42,750
D) $47,250

Question 57

Roosevelt Company processes copper ore into two products, C and U. The ore costs $5 per pound and conversion costs are $15 per pound. Roosevelt Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore. C sells for $30 per pound and U sells for $40 per pound. Assuming the physical- units method of allocating joint costs, the amount of joint costs to product C would be:

A) $600,000
B) $0
C) $800,000
D) $200,000

Question 58

Billy Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($70,000) pooled together to arrive at the following information: $\begin{array}{llll}& \text { Number of } & \text { Number of } & \text { Number of } \\\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\\text { Standard } & 20 & 15 & 375 \\\text { Deluxe } & 30 & 45 & 225 \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000\end{array}$ If activity- based costing is used, is the overhead rate per setup.

A) $500
B) $117
C) $60
D) $150

Question 59

The two methods for allocating interdepartmental service costs are the:

A) step- down and direct
B) step- down and indirect
C) step- up and variable
D) variable and fixed

Question 60

The greatest virtue of the step- down method is:

A) the lack of understandability by managers
B) the recognition of reciprocal relationships between service departments
C) its ability to allocate production department costs to service departments
D) its simplicity

Question 61

Truman Company has two departments, Hot and Cold. Relevant information is presented below: $\begin{array}{lll}&\text { Hot }&\text { Cold }\\\text { Square footage } & 1,500 & 4,500 \\\text { Number of employees } & 280 & 120\end{array}$ If total payroll processing costs are $24,000 and they are allocated on the basis of number of employees, then the amount allocated to the Cold Department should be:

A) $10,500
B) $18,000
C) $7,200
D) $6,000

Question 62

Goldie Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$$ If activity- based costing is used, the cost assigned to the standard model using the number of setups would be:

A) $44,000
B) $6,600
C) $8,400
D) $33

Question 63

Lewis Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$$ If activity- based costing is used, the cost assigned to the standard model using the number of direct labor hours would be:

A) $22,500
B) $37,500
C) $5,625
D) $3,375

Question 64

Nixon Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$$ is the total amount of overhead costs assigned to the standard model assuming traditional costing and applying overhead costs based on direct labor hours is used.

A) $33,375
B) $26,625
C) $37,500
D) $22,500

Question 65

Pedro Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $\begin{array}{lllll}&\text { Maintenance } & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept. costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of } & 16 & 24 & 48 & 64 \\\text { employees } & & & &\end{array}$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Personnel to Maintenance is:

A) $0
B) $3,539
C) $4,200
D) $4,998

Question 66

relate to more than one product and cannot be separately identified with an individual product.

A) Allocable costs
B) Joint costs
C) Common costs
D) Bundle costs

Question 67

Dove Company processes copper ore into two products, C and U. The ore costs $5 per pound and conversion costs are $15 per pound. Dove Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore. C sells for $30 per pound and U sells for $40 per pound. Assuming the physical- units method of allocating joint costs, the amount of joints costs allocated to product U would be:

A) $800,000
B) $300,000
C) $100,000
D) $400,000

Question 68

Strongsville College recently leased a photocopy machine for $1,500 per month plus $0.04 per copy. Additional variable operating costs were $0.02 per copy. Strongsville College estimated it would produce a total of 30,000 copies per month. The Physics Department estimated it would produce 6,000 copies, but actually produced only 4,000 copies. If fixed and variable- cost pools are allocated separately, then is the amount of variable cost allocated to the Physics Department:

A) $240
B) $200
C) $300
D) $360

Question 69

Coaster Company has two service department, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } 16 & 24 & 48 & 64\end{array}$$ If the direct method is used to allocate costs, then the cost of the Personnel Department after the Maintenance Department cost allocation would be:

A) $33,600
B) $38,640
C) $39,900
D) $63,840

Question 70

is the least likely alternative to be used to allocate costs.

A) Using a different cost driver for each cost pool
B) Allocating all costs evenly to all other departments
C) Using one cost driver to allocate all department costs
D) Allocating some cost pools using cost drivers and leaving other cost pools unallocated

Question 71

Mel Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: $\begin{array}{lll}&\text { Mixing } &\text { Finishing }\\\text { Long-run capacity available }{ }^{*} &18,000 & 12,000 \\\text { Budgeted }^{*} & 12,000 & 10,500 \\\text { Actual }^{*} & 15,000 & 9,000\\\text { *in labor hours }\end{array}$ Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of fixed maintenance costs allocated to the Mixing Department should be:

A) $20,000
B) $12,000
C) $14,000
D) $18,000

Question 72

Clinton Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $$\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\\text { Setups }\end{array} & \begin{array} { l } \text { Number of } \\\text { Components }\end{array} & \begin{array} { l } \text { Number of } \\\text { DLH }\end{array} \\\text { Standard } & 22 & 8 & 375 \\\text { Deluxe } & 28 & 12 & 225 \\\text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000\end{array}$$ is the total amount of overhead costs assigned to the standard model assuming activity- based costing is used.

A) $37,500
B) $26,625
C) $33,375
D) $22,500

Question 73

Lyle Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 126,000 & \$ 105,000& \$ 175,000&\$84,000 \\\text { Square footage } & 800&400&1,600&1,200 \\\text { Number of employees } &8&12&24&32\end{array}$$ If the direct method is used to allocate costs, then the total cost of the Mixing Department after allocation would be:

A) $72,000
B) $36,143
C) $105,000
D) $213,000

Question 74

Cross Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 126,000 & \$ 105,000& \$ 175,000&\$84,000 \\\text { Square footage } & 800&400&1,600&1,200 \\\text { Number of employees } &8&12&24&32\end{array}$$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, then the cost of the Mixing Department after allocation would be:

A) $279,250
B) $210,750
C) $275,500
D) $277,000

Question 75

is a cost objective.

A) Products
B) Projects
C) Jobs
D) All of these answers are correct.

Question 76

should be used to allocate fixed costs.

A) Budgeted fraction of capacity available for use x actual fixed costs
B) Actual fraction of capacity used x actual fixed costs
C) Actual fraction of capacity used x total budgeted fixed costs
D) Budgeted fraction of capacity available for use x total budgeted fixed costs

Question 77

Cerveza Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \\\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees } &16 & 24 & 48 & 64\end{array}$$ If the step- down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Maintenance is:

A) $13,440
B) $4,200
C) $3,539
D) $0

Question 78

is not a cost driver representing an "ability to bear" philosophy.

A) Revenue of each division
B) Usage
C) Total cost before central cost allocation in later division
D) Cost of goods sold by each division

Question 79

Hughes Company has two departments, Come and Go. Relevant information is presented below: $$\begin{array} { l l l } & \text { Come } & \mathrm { G } 0 \\ \text { Budgeted Sales }& \$ 400,000 & \$ 2,000,000 \\\text { Actual Sales } &\$ 300,000 & \$ 2,100,000\end{array}$$ If the total advertising expense is $300,000 and it is allocated on the basis of sales using the preferred method, then the amount allocated to the Go Department should be:

A) $37,500
B) $262,500
C) $50,000
D) $250,000

Question 80

Kurt Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: $\begin{array}{llll}& \text { Number of } & \text { Number of } & \text { Number of } \\\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\\text { Standard } & 20 & 15 & 375 \\\text { Deluxe } & 30 & 45 & 225 \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000\end{array}$ If activity- based costing is used, the cost assigned to the deluxe model using the number of components would be:

A) $21,600
B) $180
C) $3,600
D) $14,000