Deck 9: Service Department Allocations

Question 1

The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the step-down method is used.

Answer 1

True

Question 2

Castle Corporation has two service departments and two operating departments. The number of employees in each department are: The fixed costs of the Personnel Department are allocated on the basis of the number of employees. If these costs are budgeted at $37,125, the amount of cost allocated to the Cafeteria under the step-down method would be:

A)$0
B)$1,718.75
C)$1,687.50
D)$1,802.18

Answer 2

B

Question 3

The direct method is used by Adamski Publishing, Inc., to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Prepress and Printing. Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total Prepress Department cost after service department allocations is closest to:

A)$459,351
B)$455,856
C)$450,938
D)$461,782

Answer 3

D

Question 4

The step-down method of allocation is simpler and easier to apply than the direct method.

Question 5

Vota Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics. Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to:

A)$432,159
B)$428,724
C)$431,400
D)$422,160

Question 6

A company has several service departments that provide differing amounts of service to each other and to the company's operating departments. Which of the following statements is true?

A)The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.
B)The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
C)The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
D)The direct method is more accurate than the step-down method when service departments provide services to each other.

Question 7

Cieslak, Inc., allocates service department costs to operating departments using the step-down method. The company has two service departments, Administration and Physical Plant, and two operating departments, Assembly and Testing. Data concerning those departments follow: Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total Testing Department cost after allocations is closest to:

A)$623,963
B)$622,864
C)$623,760
D)$613,680

Question 8

The step-down method allocates less total cost to operating departments than does the direct method.

Question 9

Gustavson Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Wholesaling. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied. The total Wholesaling Department cost after the allocations of service department costs is closest to:

A)$337,530
B)$331,090
C)$340,240
D)$340,426

Question 10

Bagley Corporation has two service departments and two operating departments. The space occupied by each department follows: The fixed costs of Custodial Services are allocated on the basis of square feet. If these costs are budgeted at $38,000, the amount of cost allocated to General Administration under the direct method would be:

A)$0
B)$5,700
C)$6,000
D)$7,125

Question 11

Grable Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, General Management and Physical Plant, and two operating departments, Sales and After-Sales. Data concerning those departments follow: General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total After-Sales Department cost after allocations is closest to:

A)$309,430
B)$306,713
C)$293,590
D)$309,883

Question 12

Pujol Children's Clinic allocates service department costs to operating departments using the step-down method. The clinic has two service departments, Administration and Information Technology (IT), and two operating departments, Prenatal and Pediatric. Data concerning those departments follow: Administration costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. The total Pediatric Department cost after allocations is closest to:

A)$370,790
B)$328,202
C)$361,823
D)$370,659

Question 13

The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

A)$30,097
B)$134,836
C)$24,605
D)$33,048

Question 14

Prophit Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Pediatrics. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. The total Pediatrics Department cost after allocations is closest to:

A)$231,638
B)$223,132
C)$232,286
D)$182,936

Question 15

The total Fabrication Department cost after service department allocations is closest to:

A)$468,492
B)$472,372
C)$477,287
D)$475,388

Question 16

The step-down method of allocating service department costs takes into account some, but not all, of the reciprocal services that service departments provide to each other.

Question 17

Under the step-down method, once a service department's costs have been allocated to other departments, no costs should be reallocated back to the service department.

Question 18

Dubey Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery. Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to:

A)$481,336
B)$484,059
C)$473,169
D)$478,133

Question 19

The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

A)$28,679
B)$32,334
C)$23,391
D)$126,849

Question 20

Stoffle Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Data Processing and Personnel, and two operating departments, Assembly and Finishing. Data Processing Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total amount of Data Processing Department cost allocated to the two operating departments is closest to:

A)$169,600
B)$35,787
C)$29,552
D)$39,402

Question 21

Suppose the company uses the step-down method and Personnel Department costs are allocated first. The amount of this cost allocated to the Engineering Department would be:

A)$70,560
B)$0
C)$72,000
D)$78,400

Question 22

The amount of Personnel Department cost that would be allocated to Operating Department 2 under the direct method would be:

A)$0
B)$388,500
C)$420,000
D)$370,000

Question 23

Assume that the company uses the direct method of allocation. The predetermined overhead rate in the Assembly Department would be closest to:

A)$15.00
B)$16.27
C)$15.87
D)$16.00

Question 24

The total Customer Solutions Department cost after the allocations of service department costs is closest to:

A)$2,851,990
B)$2,921,486
C)$2,878,917
D)$2,890,630

Question 25

Suppose the company uses the step-down method of allocation and Personnel Department costs are allocated first. The amount of this cost allocated to the Engineering Department under the step-down method would be:

A)$466,200
B)$55,500
C)$0
D)$58,275

Question 26

Assume that the company uses the step-down method of allocation with Custodial Services allocated first. The amount of Custodial Services cost allocated to the Assembly Department would be:

A)$0
B)$28,000
C)$24,000
D)$25,200

Question 27

Assume that the company uses the step-down method of allocation with Custodial Services allocated first. The amount of cost allocated from the Cafeteria to the Cutting Department would be:

A)$0
B)$12,000
C)$14,160
D)$12,390

Question 28

In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Law Department is closest to:

A)$36,543
B)$32,702
C)$66,819
D)$33,925

Question 29

The total Corporate Law Department cost after allocations is closest to:

A)$413,367
B)$368,946
C)$422,931
D)$423,304

Question 30

The total amount of Administrative Department cost allocated to the Adult Medicine Department is closest to:

A)$31,019
B)$20,520
C)$21,600
D)$18,240

Question 31

The total Pediatrics Department cost after the allocations of service department costs is closest to:

A)$521,388
B)$519,234
C)$509,100
D)$521,700

Question 32

The amount of Personnel Department cost that would be allocated to Producing Department 2 under the direct method is closest to:

A)$0
B)$261,000
C)$269,072
D)$296,591

Question 33

Assume that the company uses the step-down method of allocation with Custodial Services allocated first. The amount of cost allocated from the Cafeteria to Custodial Services would be:

A)$0
B)$1,652
C)$1,400
D)$1,514

Question 34

Assume Millard allocates service department costs by the direct method. After all allocations, the total amount of overhead costs in Operating Department 1 will be:

A)$155,000
B)$191,000
C)$157,100
D)$176,000

Question 35

The total amount of Administrative Department cost allocated to the Assembly Department is closest to:

A)$22,598
B)$22,838
C)$24,360
D)$24,039

Question 36

Assume Millard allocates service department costs by the step-down method with Service Department A allocated first. After all allocations, the total amount of overhead cost in Operating Department 2 will be closest to:

A)$128,000
B)$127,000
C)$154,143
D)$102,833

Question 37

Costs in the Personnel Department total $900,000 per year. Under the step-down method, the costs of the Personnel Department are allocated before the costs of the Engineering Department are allocated. The amount of this cost allocated to the Engineering Department under the step-down method is closest to:

A)$0
B)$81,000
C)$83,505
D)$92,046

Question 38

The total Surgery Department cost after service department allocations is closest to:

A)$540,968
B)$539,348
C)$535,993
D)$532,067

Question 39

Suppose the company uses the direct method of allocation. The amount of Personnel Department cost that would be allocated to Operating Department 2 would be:

A)$0
B)$294,000
C)$270,000
D)$264,600

Question 40

Assume that the company uses the direct method of allocation. The amount of Custodial Services cost allocated to the Cutting Department would be:

A)$0
B)$20,160
C)$22,400
D)$19,200

Question 41

Vitro Corporation has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. The company uses the step-down method to allocate service department costs to operating departments. Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base
B.Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 42

The total Finishing Department cost after allocations is closest to:

A)$460,190
B)$471,275
C)$470,870
D)$468,994

Question 43

The total Operating Department Y cost after allocations is closest to:

A)$242,941
B)$242,740
C)$237,240
D)$241,816

Question 44

Mitri Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Finishing. Administrative Department costs are allocated on the basis of employee hours and Facilities Department costs are allocated on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 45

In the first step of the allocation, the amount of Administration Department cost allocated to the Assembly Department is closest to:

A)$19,823
B)$17,214
C)$18,690
D)$12,384

Question 46

Catoire Consultancy uses the direct method to allocate its service department costs to its operating departments. The company has two service departments, Information Technology and Administration, and two operating departments, Corporate Practice and Government Practice. Data concerning those departments follow: Information Technology Department costs are allocated on the basis of computers and Administration Department costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 47

In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Medicine Department is closest to:

A)$26,555
B)$56,343
C)$28,875
D)$25,788

Question 48

Snopek Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Administration Department costs are allocated first on the basis of employee time and Facilities Department costs are allocated second on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 49

Delta Manufacturing Company has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. Delta allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow: Required:
a. Prepare a schedule to allocate service department costs to the production departments by the direct method (round all dollar amounts to the nearest whole dollar).
b. Prepare a schedule to allocate service department costs to the production departments by the step-down method, allocating Custodial Services first (round all amounts to the nearest whole dollar).

Question 50

Mazon Corporation uses the direct method to allocate its two service department costs to its two operating departments. Data concerning those departments follow: Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base
B.Required:
Allocate the service department costs to the operating departments using the direct method.

Question 51

The direct method is used by Ohair Clinic to allocate its service department costs to its operating departments. Data concerning those departments follow: Information Technology costs are allocated on the basis of computers and Personnel costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 52

The total Geriatric Medicine Department cost after allocations is closest to:

A)$338,117
B)$338,676
C)$328,768
D)$292,616

Question 53

Beames Emergency Care Hospital uses the step-down method to allocate service department costs to operating departments. The hospital has two service departments, Administration and Information Technology (IT), and two operating departments, Emergency Room and Intensive Care. Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 54

Vercher Natal Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Administration and Information Technology (IT), and two operating departments, Prenatal Care and Postnatal Care. Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 55

Flinders Company has two service departments, Factory Administration and Maintenance, and two operating departments. Selected information relating to these departments is given below: The company allocates service department costs by the step-down method. Costs of Factory Administration are allocated first on the basis of number of employees, and then costs of Maintenance are allocated on the basis of total labor hours.
Required:
Prepare a schedule showing the allocation of service department costs to other departments.

Question 56

In the first step of the allocation, the amount of Service Department A cost allocated to the Operating Department X is closest to:

A)$17,600
B)$13,235
C)$15,804
D)$18,438