Deck 7: Cost Allocation: Departments, Joint Products, and By-Products

Question 1

Cost allocation is an important strategic issue for U.S. manufacturing firms is with foreign subsidiaries because of:

A)The tax implications.
B)Quality concerns.
C)Import restrictions.
D)Cultural differences.
E)The company's desire to grow.

Answer 1

A

Question 2

Allocation of service department costs to producing departments is the most complex of the allocation phase of departmental cost allocation because of the likely presence of:

A)Manager bias.
B)Formula distracters.
C)Repetitive steps.
D)Reciprocal flows.
E)Non-value adding activities.

Answer 2

D

Question 3

A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect:

A)Management reward systems.
B)Management fraud.
C)Taxes in domestic and foreign countries.
D)The firm's financial statements.
E)The fair share of cost by a governmental unit.

Answer 3

C

Question 4

The reciprocal method can be solved using the Excel function:

A)Goal Seek
B)Regression
C)Solver
D)Scenarios
E)Pivot Tables

Question 5

An alternative concept of fairness in cost allocation, absent the cause-and-effect basis, includes:

A)Ability-to-bear.
B)Efficiency.
C)Different costs for different purposes.
D)Consistency.

Question 6

The objectives of cost allocation are to:

A)Motivate, provide incentives, and determine fair rewards.
B)Accurately define, divide and spread direct costs.
C)Value, measure, and interpret cost data.
D)Connect, communicate, and discern information.
E)Define, refine, and re-define indirect costs.

Question 7

An overhead cost that can be traced directly to either a service or production department:

A)Is called a "flow through" cost.
B)Requires less allocation effort.
C)Is charged directly to that department.
D)Must be variable.
E)Must be fixed.

Question 8

Which of the following methods considers all reciprocal flows between service departments through simultaneous equations?

A)Dual method.
B)Step method.
C)Reciprocal method.
D)Direct method.
E)The net realizable value method.

Question 9

Dual allocation is a cost allocation approach that separates direct and indirect costs, tracing the direct costs directly to the cost object that:

A)Can bear the cost.
B)Relates best to the cost.
C)Is first identified with the cost.
D)Caused the cost.
E)Is most impacted by the cost.

Question 10

The concepts of cost allocation that are used in manufacturing can also apply in:

A)Service and not-for-profit industries.
B)Service industries.
C)Not-for-profit industries.
D)Limited instances outside of manufacturing.
E)The concepts apply only in manufacturing.

Question 11

The direct method of departmental cost allocation ignores:

A)The managers' bias.
B)Accrual accounting.
C)Tax implications.
D)Long-term implications.
E)Reciprocal flows.

Question 12

Cost allocation of shared facilities cost is intended to remind managers of:

A)The cost of using a shared resource.
B)Both the cost and value of using shared resources.
C)How much capacity a firm has.
D)Why the firm invests in these facilities.
E)How dependent the managers are for these facilities.

Question 13

The most effective basis for cost allocation exists when which one of the following can be determined?

A)Cost shifting.
B)Benefit received.
C)Equity share.
D)Cause and effect relationship.
E)Ability to bear.

Question 14

In making decisions about whether to sell or further process joint products, allocation of common or joint costs is:

A)Essential.
B)Useful.
C)Irrelevant.
D)Is useful depending on the method chosen.
E)Is the only way to get the true total product cost.

Question 15

By-product costing that uses the asset recognition method(s) creates:

A)Expense recognition in the current period.
B)A distortion of net income.
C)An adjustment on the income statement.
D)An inventory value in the period in which the by-products are produced.
E)A result that is not compatible with GAAP.

Question 16

Which one of the following methods uses units of output to allocate joint costs to joint products?

A)Net realizable value method.
B)Physical units method.
C)Net sales value method.
D)Sales value at split-off method.
E)Activity-based costing.

Question 17

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between:

A)The service departments.
B)The producing departments.
C)Multiple products.
D)Competing departments.
E)Similar, but separate, products.

Question 18

The mathematical technique that underlies the reciprocal cost allocation method is:

A)Regression analysis.
B)Simultaneous equations.
C)Analysis of variances.
D)Complex algebraic functions.
E)Multiple correlation.

Question 19

If a budgeted activity base is used as the base in cost allocation, each department's cost allocation will be predictable, and not influenced by the:

A)Actual total cost.
B)Change in activity.
C)Variations from budget.
D)Errors in calculations.
E)Actual usage in other departments.

Question 20

Cost allocation provides a service firm a basis for evaluating the:

A)Cost and profitability of its services.
B)Value of its services.
C)Manufacturing costs for the company.
D)Profitability of its customers.

Question 21

The amount of joint costs allocated to product L using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$3,614.
B)$4,688.
C)$23,438.
D)$33,434.
E)$46,875.

Question 22

The amount of joint costs allocated to product M using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$3,614.
B)$4,688.
C)$23,438.
D)$33,434.
E)$46,875.

Question 23

The amount of joint costs allocated to product M using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$23,438.
B)$33,434.
C)$40,313.
D)$27,109.
E)$11,250.

Question 24

The amount of joint costs allocated to product Y using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$22,876.
B)$44,300.
C)$18,500.
D)$16,000.
E)$32,000.

Question 25

The amount of joint costs allocated to product L using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$23,438.
B)$33,434.
C)$40,313.
D)$27,109.
E)$11,250.

Question 26

The amount of joint costs allocated to product N using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$23,438.
B)$33,434.
C)$40,313.
D)$27,109.
E)$11,250.

Question 27

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$104,500.
B)$109,950.
C)$124,050.
D)$130,750.
E)$136,500.

Question 28

The total cost accumulated in the assembly department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$102,750.
B)$114,600.
C)$85,800.
D)$131,250.
E)$135,000.

Question 29

Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service?

A)Direct method.
B)Indirect method.
C)Step method.
D)Reciprocal method.
E)Cross-functional method.

Question 30

Which of the following is not an ethical issue managers encounter with cost allocation?

A)Products that are produced for both a competitive market and a public agency.
B)Governmental agency provides a free service to the public.
C)Governmental agency reimburses the costs of a private institution.
D)Costs of products sold to or from foreign subsidiaries.

Question 31

The total cost accumulated in the fabrication department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$102,750.
B)$114,600.
C)$87,000.
D)$131,250.
E)$135,000.

Question 32

The total cost accumulated in the fabrication department using the step method is (assume the purchasing department goes first; calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$104,500.
B)$109,950.
C)$124,050.
D)$130,750.
E)$136,500.

Question 33

The amount of joint costs allocated to product Z using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$8,000.
B)$32,000.
C)$43,222.
D)$14,000.
E)$6,666.

Question 34

The departmental cost allocation approach is preferred when the firm has:

A)Homogeneous processes.
B)Heterogeneous processes.
C)Diverse products.
D)Many production activities.

Question 35

Which one of the following methods of allocating joint costs uses a measure of weight, size or number of units to allocate joint costs to joint products?

A)Net realizable value method.
B)Physical unit method.
C)Product measure method.
D)Cost measure method.
E)Sales value at split-off method.

Question 36

Revenue methods of by-product cost allocation are justified on financial accounting concepts of:

A)Revenue realization and materiality.
B)Revenue realization, materiality, and cost-benefit.
C)Materiality and cost-benefit.
D)Materiality and stable dollar.
E)Cost-benefit and stable dollar.

Question 37

The amount of joint costs allocated to product N using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$3,614.
B)$4,688.
C)$23,438.
D)$33,434.
E)$46,875.

Question 38

Which one of the following methods of allocating joint costs allocates joint costs to joint products on the basis of estimated sales values at the split-off point?

A)Net realizable value method.
B)Physical measure method.
C)Average cost method.
D)Net sales value method.
E)Sales value at split-off method.

Question 39

The amount of joint costs allocated to product X using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$19,280.
B)$42,450.
C)$23,222.
D)$48,950.
E)$56,000.

Question 40

A concept which is commonly employed with allocation bases related to size is:

A)Cost shifting.
B)Benefit received.
C)Equity share.
D)Cause and effect relationship.
E)Ability to bear.

Question 41

Place the following phases of the departmental approach in the correct order. 1. Allocate the production department costs to products.
2) Allocate service costs to the overhead costs.
3) Allocate the service department costs to the production department.
4) Trace all direct costs and allocate overhead costs to both the service and production departments.

A)3,4,1,2.
B)4,3,2,1.
C)4,3,1.
D)3,2,1.
E)1,3,2.

Question 42

The cost allocation method most widely used because of its accuracy and ability to provide a detailed level of analysis is:

A)Departmental approach.
B)Activity-based approach.
C)Direct approach.
D)Accounting approach.
E)Joint product costing.

Question 43

By-product costing approaches include:

A)Activity-based approach.
B)Cost approach.
C)Asset recognition approach.
D)Resource consumption approach.
E)Sales value at split off approach.

Question 44

Which of the following statements best describes a by-product?

A)A product that is produced from material that would otherwise be scrap.
B)A product that has a selling price similar to that of the main product.
C)A product created along with the main product whose sales value does not cover its cost of production.
D)A product that usually produces a small amount of revenue when compared to the main product's revenue.
E)A product that has a lower unit selling price than the main unit.

Question 45

The amount of joint costs allocated to product Z using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$14,333.
B)$15,158.
C)$18,624.
D)$17,667.
E)$32,454.

Question 46

The amount of joint costs allocated to product Y using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$13,540.
B)$32,000.
C)$22,222.
D)$28,499.
E)$17,667.

Question 47

Relative sales value at split-off is used to allocate: Cost Beyond

A)Option A
B)Option B
C)Option C
D)Option D

Question 48

The amount of joint costs allocated to product X using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$24,000.
B)$21,333.
C)$36,444.
D)$40,842.
E)$32,110.

Question 49

The amount of joint costs allocated to product Z using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$19,222.
B)$35,000.
C)$18,450.
D)$28,496.
E)$17,778.

Question 50

Johns Company manufactures products R, S, and T from a joint process. The following information is available: Assuming that joint product costs are allocated using the relative-sales-value at split-off approach, what was the sales value at split-off for products R and S?

A)Option A
B)Option B
C)Option C
D)Option D

Question 51

The amount of joint costs allocated to product Y using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$21,222.
B)$24,000.
C)$18,050.
D)$17,155.
E)$33,333.

Question 52

Which of the following is not one of the objectives of cost allocation?

A)Motivate managers to exert a high-level of effort.
B)Provide useful departmental and product costs.
C)Identify production constraints.
D)Provide the right incentive for managers to make the right decisions.
E)Provide an appropriate basis for performance evaluation.

Question 53

The amount of joint costs allocated to product X using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$20.000.
B)$32,444.
C)$40,000.
D)$17,677.
E)$15,000.

Question 54

Which is not a common method used to allocate costs under the departmental approach?

A)Dual method.
B)Step method.
C)Reciprocal method.
D)Direct method.

Question 55

Which of the following is an example of a physical measure used in the physical measure method?

A)Pounds.
B)Minutes.
C)Seconds.
D)Dollars.
E)Volume.

Question 56

The total cost accumulated in the marketing department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$100,000.
B)$104,000.
C)$126,000.
D)$130,000.
E)$87,000.

Question 57

For the purposes of cost accumulation, which of the following are identifiable as different individual products before the split-off point?

A)Option A
B)Option B
C)Option C
D)Option D

Question 58

Net Realizable Value (NRV) of a product is:

A)Split-off cost - profit margin - additional processing and selling cost.
B)Profit at split-off + additional processing and selling cost.
C)Ultimate sales value - additional processing and selling cost.
D)Ultimate sales value + additional processing and selling cost.
E)Cost allocation plus separable cost.

Question 59

A key disincentive effect of departmental cost allocation can occur when:

A)allocated costs are less than external purchase costs.
B)managers do not understand the incentives in the allocation base.
C)the allocation base is actual usage.
D)the allocation base is budgeted usage.
E)the allocation base is greater than usage.

Question 60

The departmental approach of cost allocation recognizes that the typical manufacturing operation involves which type(s) of departments?

A)Service departments and production departments.
B)Production departments and assembly departments.
C)Joint product departments and separable departments.
D)Cost pools and cost objects.
E)Support departments and other service departments.

Question 61

The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$100,000.
B)$109,000.
C)$126,000.
D)$130,000.
E)$135,000.

Question 62

The amount of joint costs allocated to product DBB-3 using the sales value at split-off method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$939,240.
B)$216,870.
C)$447,120.
D)$757,800.
E)$2,213,640.

Question 63

The total cost accumulated in the sales department using the step method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$100,000.
B)$104,000.
C)$126,000.
D)$130,000.
E)$135,000.

Question 64

The total cost accumulated in the sales department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$102,222.
B)$122,402.
C)$127,778.
D)$142,471.
E)$150,050.

Question 65

The total cost accumulated in the finishing department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,033,333.
B)$1,690,000.
C)$686,667.
D)$646,667.
E)$693,333.

Question 66

The amount of joint costs allocated to product DBB-1 using the sales value at split-off method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$939,240.
B)$216,870.
C)$447,120.
D)$757,800.
E)$2,213,640.

Question 67

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,000,125.
B)$1,890,000.
C)$689,875.
D)$642,000.
E)$923,000.

Question 68

The amount of joint costs allocated to product DBB-3 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$2,009,160.
B)$286,500.
C)$881,640.
D)$667,345.
E)$709,200.

Question 69

The amount of joint costs allocated to product DBB-1 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$2,009,160.
B)$286,500.
C)$881,640.
D)$667,345.
E)$709,200.

Question 70

The amount of joint costs allocated to product DBB-2 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$54,250.
B)$757,800.
C)$1,705,320.
D)$49,200.
E)$1,136,880.

Question 71

The amount of joint costs allocated to product DBB-3 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$54,250.
B)$757,800.
C)$1,705,320.
D)$49,200.
E)$1,136,880.

Question 72

The amount of joint costs allocated to product DBB-2 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$2,009,160.
B)$286,500.
C)$881,640.
D)$667,345.
E)$709,200.

Question 73

The total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$102,222.
B)$122,402.
C)$127,778.
D)$142,471.
E)$150,050.

Question 74

The total cost accumulated in the finishing department using the reciprocal method is(calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,890,000.
B)$627,143.
C)$682,551
D)$1,062,857.
E)$1,007,449.

Question 75

The amount of joint costs allocated to product DBB-1 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$54,250.
B)$757,800.
C)$1,705,320.
D)$49,200.
E)$1,136,880.

Question 76

The amount of joint costs allocated to product DBB-2 using the sales value at split-off method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$939,240.
B)$216,870.
C)$447,120.
D)$757,800.
E)$2,213,640.

Question 77

The total cost accumulated in the finishing department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,000,125.
B)$1,890,000.
C)$689,875.
D)$642,000.
E)$923,000.

Question 78

The total cost accumulated in the assembly department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,890,000.
B)$627,143.
C)$682,551.
D)$1,062,857.
E)$1,007,449.

Question 79

The total cost accumulated in the marketing department using the step method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

A)$100,000.
B)$104,000.
C)$126,000.
D)$130,000.
E)$135,000.

Question 80

The total cost accumulated in the assembly department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

A)$1,033,333.
B)$1,690,000.
C)$686,667.
D)$646,667.
E)$693,333.