Deck 15: Allocation of Support-Department Costs, Common Costs, and Revenues

Question 1

The method that allocates costs in each cost pool using the same rate per unit is known as the ________.

A) incremental cost-allocation method
B) reciprocal cost-allocation method
C) single-rate cost allocation method
D) dual-rate cost-allocation method

Answer 1

single-rate cost allocation method

Question 2

Which of the following is a disadvantage of a dual-rate method?

A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.
B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
C) It allocates fixed and variable-cost pool using the same cost-allocation base, which will mislead managers in making decisions.
D) It does not guide department managers to make decisions that benefit both the organization as a whole and each department.

Answer 2

It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.

Question 3

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a single-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume actual usage is used to allocate laboratory costs.

A) $10,228,571.4
B) $8,960,000
C) $7,671,429
D) $6,720,000

Answer 3

$6,720,000

Question 4

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.

A) $10,300,000
B) $10,100,000
C) $9,600,000
D) $10,800,000

Question 5

Which of the following departments would not be considered a service or support department?

A) assembly
B) information systems
C) shipping
D) plant maintenance

Question 6

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Small Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.

A) $13,920,000
B) $11,670,000
C) $10,370,000
D) $8,120,000

Question 7

The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 120,000 copies and by the Operations Department was 360,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

A) $69,000
B) $117,000
C) $70,980
D) $69,480

Question 8

The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 70,000 copies and by the Operations Department was 330,000 copies. If a single-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs. (Do not round interim calculations and round the final calculation to the nearest dollar.)

A) $20,250
B) $18,000
C) $12,600
D) $2100

Question 9

Which of the following would be considered the biggest advantage of using practical capacity to allocate costs?

A) focuses the user's division with the costs of overused capacity
B) never causes over or under-allocated overhead
C) burdens the user divisions with the costs of unused capacity
D) focuses management's attention on unused capacity

Question 10

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department?

A) $14,153,333
B) $10,293,333
C) $9,200,000
D) $12,650,000

Question 11

Which of the following is an advantage of using practical capacity to allocate costs?

A) is that it allows a downward supply spiral to develop
B) is that it focuses management's attention on managing unused capacity
C) is that budgets are much easier to develop
D) is that it results in departments bearing a lower percentage of fixed costs

Question 12

Which of the following is a disadvantage of single-rate method?

A) It is very costly to implement.
B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
C) It does not signal to department managers how variable costs and fixed costs behave differently.
D) It requires managers to distinguish variable costs from fixed costs, which is often a challenging task.

Question 13

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours. If a single-rate cost-allocation method is used, what is the allocation rate per hour used? (Round the final answer to the nearest dollar.)

A) $120.50
B) $101.60
C) $158.75
D) $77.12

Question 14

The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 320,000 copies. If a single-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department? (Round any intermediary calculations to the nearest cent.)

A) $18,200
B) $6000
C) $12,200
D) $21,250

Question 15

Consider the following information attributed to the material management department
Budgeted usage of materials-handling labor-hours 3500
Budgeted cost pools:
Fixed costs $154,000
Variable costs $126,000 (3500 hours x $36 per hour)
The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments. Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month, what would be the allocation rate and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round final answers to the nearest dollar.)

A) $80 an hour for a total of $40,000
B) $36 an hour for a total of $40,000
C) $36 an hour for a total of $18,000
D) $560 an hour for a total of $80

Question 16

The dual-rate cost-allocation method classifies costs in each cost pool into a ________.

A) budgeted-cost pool and an actual-cost pool
B) variable-cost pool and a fixed-cost pool
C) direct-cost pool and an indirect-cost pool
D) direct-cost pool and a reciprocal-cost pool

Question 17

Which of the following is an advantage of a dual-rate method?

A) It is the most widely used method in practice.
B) It is less costly to implement.
C) It avoids the expensive analysis for categorizing costs as either fixed or variable.
D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.

Question 18

The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 120,000 copies and by the Operations Department was 380,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department?

A) $65,100
B) $68,600
C) $64,140
D) $67,640

Question 19

When using the dual-rate method, the fixed cost allocation is based on ________.

A) actual rate
B) budgeted usage
C) incremental cost allocation
D) prime cost allocation

Question 20

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Large Plane Department?

A) $9,846,000
B) $9,012,500
C) $7,658,000
D) $11,587,500

Question 21

What is an operating department and how is it different from a support department? Give examples of each.

Question 22

Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 hours. If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division?

A) $930,000
B) $950,000
C) $975,000
D) $780,000

Question 23

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

Question 24

When actual cost-allocations rates are used, which of the following would be true?

A) user divisions pay for costs that exceed budgeted amounts
B) managers of the supplier division are motivated to improve efficiency
C) user divisions are unaware of the allocated amounts until the end of the budget period
D) managers know with certainty the rates to be used in that budget period

Question 25

The costs of unused capacity are highlighted when ________.

A) actual usage based allocations are used
B) budgeted usage allocations are used
C) practical capacity-based allocations are used
D) the dual-rate cost-allocation method allocates fixed costs based on actual usage

Question 26

The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.
Required:
a.If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
b.For the month of June, if a single-rate cost-allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs.
c.If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
d.For the month of June, if a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Question 27

Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 hours. If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs.

A) $2,050,000
B) $1,850,000
C) $1,200,000
D) $1,537,500

Question 28

The Pitt Corporation has been outsourcing data processing in the belief that such outsourcing would reduce costs and increase corporate profitability. In spite of this, there has been no meaningful increase in corporate profitability.
Previously, Pitt used a single-rate method to allocate data processing costs. A per unit cost for data processing was computed and compared to the price of the outside supplier. The price of the outside supplier was lower and thus, the outside bid was accepted.
Required:
Formulate a possible reason why Pitt's profitability has not shown improvement in terms of the cost allocation method used.

Question 29

When budgeted cost-allocations rates are used ________.

A) user departments are not informed about the charges until the end of the period which makes decision making during the period difficult
B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource
C) user divisions pay for costs that exceed budgeted amounts
D) user divisions pay for inefficiencies of the supplier department

Question 30

Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services.

Question 31

An advantage of the single-rate method is that it is the most accurate method of cost-allocation.

Question 32

The single-rate method transforms the direct costs per hour into indirect costs to users of that facility.

Question 33

The dual-rate cost-allocation method provides better information for decision making than the single-rate method as it differentiates between fixed and variable costs and its allocation.

Question 34

The single cost-allocation method makes no distinction between fixed and variable costs.

Question 35

Illumination Corp operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1400 hours and by the Night Light Division was 700 hours. If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

A) $516,000
B) $586,000
C) $532,000
D) $602,000

Question 36

Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1400 hours and by the Night Light Division was 700 hours. If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division?

A) $1,440,000
B) $1,344,000
C) $1,424,000
D) $1,360,000

Question 37

The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance-hour. The facility averages 40,000 maintenance-hours a year. Budgeted and actual hours per user for 2017 are as follows:

Assume that budgeted maintenance-hours are used to calculate the allocation rates.
Required:
a.If a single-rate cost-allocation method is used, what amount of maintenance cost will be budgeted for each department?
b.If a single-rate cost-allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage?
c.If a dual-rate cost-allocation method is used, what amount of maintenance cost will be budgeted for each department?
d.If a dual-rate cost-allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage? Based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

Question 38

To discourage unnecessary use of a support department, management might ________.

A) allocate user department costs based upon support department usage
B) allocate support department costs based upon user department usage
C) allocate a fixed amount of support department costs to each and every department
D) allocate a fixed amount of user department costs to each and every department

Question 39

Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then ________.

A) user-division managers are motivated to make accurate long-run usage forecasts
B) user-division managers can better plan for the short-run and for the long-run
C) the costs of unused capacity are highlighted
D) variations in one division's usage affect another division's allocation

Question 40

Van Meter Fig Company has substantial fluctuations in its production costs because of the seasonality of figs.
Would you recommend an actual or budgeted allocation base? Why? Would you recommend calculating monthly, seasonal, or annual allocation rates? Why?

Question 41

Special cost-allocation problems arise when ________.

A) support department costs exceed budgetary estimates
B) practical capacity is used as the allocation base
C) support departments provide reciprocal services to each other and operating departments
D) the same cost-allocation base is used among various support departments

Question 42

When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.

Question 43

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $170,000 are allocated based on the number of employees. The costs of operating departments A and B are $188,000 and $282,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Personnel Department costs will be allocated to Department B? (Do not round any intermediary calculations.)

A) $44,737
B) $50,000
C) $107,368
D) $120,000

Question 44

Managers of supplier departments ________.

A) view the budgeted rates positively if unfavorable cost variances occur due to price decreases outside of their control
B) view the budgeted rates negatively if favorable cost variances occur due to price decreases outside of their control
C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control
D) view the budgeted rates negatively if unfavorable cost variances occur due to price decreases outside of their control

Question 45

Which of the following describes reciprocal support?

A) the accounting department provides services to production
B) molding provides services to production and accounting provides services to both molding and production
C) assembling department provides services to three other departments
D) the materials management department provides support to all departments including the production control department which also provides services to the materials management department

Question 46

When using the direct allocation method, a cost accountant would ________.

A) not allocate support department costs to other support departments
B) use information about reciprocal services provided among support departments and therefore could generate inaccurate estimates of the cost of operating departments
C) allocate complete reciprocated costs
D) allocate support department costs to other support departments

Question 47

Under which allocation method are one-way reciprocal support services recognized?

A) direct method
B) artificial cost method
C) reciprocal method
D) step-down method

Question 48

Marvelous Motors is a small motor supply outlet that sells motors to companies that make various small motorized appliances. The fixed operating costs of the company are $300,000 per year. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to the motors and wants to review the company status on a quarterly basis. The shareholder is trying to determine whether the costs should be allocated each quarter based on the 25% of the annual fixed operating costs ($75,000) or by using an annual forecast budget to allocate the costs. The following information is provided for the operations of the company:

Required:
a.What amount of fixed operating costs are assigned to each motor by quarter when actual sales are used as the allocation base and $75,000 is allocated?
b.How much fixed cost is recovered each quarter under requirement a.?
c.What amount of fixed operating costs are assigned to each motor by quarter when forecast sales are used as the allocation base and the rate is calculated annually as part of the budgetary process?
d.How much fixed cost is recovered each quarter under requirement c.?
e.Which method seems more appropriate in this case? Explain.

Question 49

When actual cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency.

Question 50

The method that allocates each department's budgeted costs to operating departments only is called ________.

A) direct method
B) step-down method
C) reciprocal method
D) sequential method

Question 51

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $360,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $188,000 and $282,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Maintenance Department costs will be allocated to Department B? (Do not round any intermediary calculations.)

A) $100,398
B) $128,168
C) $87,742
D) $167,330

Question 52

Which of the following statements is true about the step-down method?

A) it partially recognizes the services provided among support departments
B) it does not recognize the total services that support departments provide to each other
C) it is conceptually the most precise method
D) it results in allocating only the support costs used by operating departments

Question 53

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

Question 54

The reciprocal allocation method ________.

A) is the most widely used because of its simplicity
B) requires the ranking of support departments in the order that the allocation is to proceed
C) fully incorporates interdepartmental relationships into the support-department cost allocations
D) allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

Question 55

Jonathan has managed a downtown store in a major metropolitan city for several years. The firm has ten stores in varying locations. In the past, senior management noticed Jonathan's work and he has received very good annual evaluations for his management of the store.
This year his store has generated steady growth in sales, but earnings have been deteriorating. After examining the monthly performance report generated by the company budgeting department, he noticed that increasing fixed costs is causing the decrease in earnings.
Administrative corporate costs, primarily fixed costs, are allocated to individual stores each month based on actual sales for that month. Two of these stores are currently growing at a rapid pace, while four other stores are having operating difficulties.
Required:
From the information presented, what do you think is the cause of Jonathan's reported decrease in earnings? How can this be corrected?

Question 56

When budgeted fixed costs are allocated based on actual usage, user departments will not know their fixed-cost allocations until the end of the budget period.

Question 57

Which of the following describes who the direct allocation method allocates support-department costs?

A) it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments
B) it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments
C) it allocates each support-department's costs to operating departments only
D) it requires managers to rank the support departments in the order that the step-down allocation is to proceed

Question 58

Because the variable costs are directly and causally linked to usage, charging them as a function of the actual usage is appropriate.

Question 59

Foodiez Inn is a fast-food restaurant that sells burgers and hot dogs in a 1980s environment. The fixed operating costs of the company are $10,000 per month. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot dogs. The following information is provided for the operations of the company:

Required:
a.What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b.Hot dog sales for January and February remained constant. Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not. Comment on any other observations.

Question 60

Which of the following statements is false with regards to departmental cost allocations?

A) amounts allocated to departments will most likely differ depending on the cost allocation method used
B) the total amount allocated among departments will differ in total depending on the cost allocation method used
C) the reciprocal method is usually the most conceptually precise method because it considers mutual services provided among all support departments
D) the step-down and direct methods are simple for managers to compute and understand relative to the reciprocal method

Question 61

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $208,000 and $312,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)

A) $31,079
B) $79,424
C) $49,640
D) $88,489

Question 62

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $112,500 and $135,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Warehouse Department costs will be allocated to Department Books? (Do not round any intermediary calculations.)

A) $143,657
B) $206,343
C) $135,000
D) $170,679

Question 63

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $400,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $240,000 and $360,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Personnel Department costs will be allocated to Department A? (Do not round any intermediary calculations.)

A) $58,824
B) $52,632
C) $70,588
D) $141,176

Question 64

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

A) DP= $70,000 + (700 / 4850) PM
B) DP= $70,000 + (3900/ 17,100) PM
C) DP= $70,000 × (700 / 4850) + $370,000 × (3900 / 17,100)
D) DP= $370,000 + (700 / 17,100) DP

Question 65

The cost-allocation method that allocates each support-department's costs to operating departments only is the direct method.

Question 66

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $310,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $102,500 and $123,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Warehouse Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)

A) $33,856
B) $104,953
C) $125,393
D) $34,702

Question 67

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

A) P = $400,000 - $150,000 (1000 / 13,100) M
B) P = (1000 / 13,100) M
C) P = $150,000 + (1000 / 13,100) M
D) P = $150,000

Question 68

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

What is the complete reciprocated cost of the Personnel Department? (Do not round any intermediary calculations.)

A) $170,000
B) $208,140
C) $180,000
D) $213,012

Question 69

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $310,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $190,000 are allocated based on the number of employees. The costs of operating departments A and B are $200,000 and $300,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Maintenance Department costs will be allocated to Department A? (Do not round any intermediary calculations.)

A) $145,277
B) $334,211
C) $133,684
D) $207,211

Question 70

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $200,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $142,500 and $171,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round intermediary calculations to three decimal places.)

A) $144,992
B) $91,979
C) $123,487
D) $108,021

Question 71

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $320,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $125,000 and $150,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Data Center Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $62,182
B) $180,000
C) $24,393
D) $0

Question 72

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

What is the complete reciprocated cost of the Data Processing Department? (Do not round any intermediary calculations.)

A) $220,000
B) $120,690
C) $149,210
D) $171,269

Question 73

One version of the reciprocal method of cost allocation uses a sequence that begins with allocating the costs of the support department that renders the lowest amount of services to support departments and ends with the allocation of costs of the department that renders the highest dollar amount of services to other support departments.

Question 74

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

What is the complete reciprocated cost of the Plant Maintenance Department? (Do not round any intermediary calculations.)

A) $411,143
B) $400,693
C) $440,000
D) $404,957

Question 75

Some companies prefer not to allocate production or plant administration costs to jobs, products or customers because these costs are fixed and independent of the level of activity.

Question 76

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $184,000 and $276,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)

A) $231,452
B) $121,677
C) $50,111
D) $159,444

Question 77

Two or more support departments whose costs are being allocated can also provide support to each other and as well as to operating departments.

Question 78

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $137,500 and $165,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the direct method, what amount of Data Center Department costs will be allocated to Department Music? (Do not round any intermediary calculations.)

A) $180,000
B) $83,505
C) $96,495
D) $75,349

Question 79

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

What is the complete reciprocated cost of the Maintenance Department? (Do not round any intermediary calculations.)

A) $361,556
B) $356,154
C) $340,000
D) $0

Question 80

Which of the following is one of the methods of allocating support department costs to operating departments that partially recognizes mutual service provided among all support departments?

A) dual-cost allocation method
B) direct method
C) sequential allocation method
D) single-rate cost allocation method