Question 1

Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments?

Accepted Answer

The algebraic method allows for the reciprocal allocation of service costs among the service departments themselves in addition to allocating costs to the revenue-producing departments. This method acknowledges the interdependencies between service departments by solving simultaneous equations to allocate costs accurately.

Question 2

A service department provides specific functional tasks for other internal units.Which of the following activities would not be engaged in by a service department?

Accepted Answer

Manufacturing is not typically a task performed by a service department as it involves the production of physical goods rather than providing specific services to other internal units.

Question 3

Which service department cost allocation method assigns indirect costs to cost objects after considering some of the interrelationships of the cost objects?

Accepted Answer

The step method assigns indirect costs to cost objects after considering some of the interrelationships of the cost objects. The indirect method and direct method do not take into consideration the interrelationships of the cost objects, and the algebraic method is a combination of the step and direct methods.

Question 4

All of the following objectives are reasons to allocate service department costs to compute full cost except to

Accepted Answer

Allocated costs are used to measure controllable costs in addition to providing information on cost recovery and reflecting production's "fair share" of costs. Full costing is typically required by regulations in some instances, such as for government contracts or financial reporting purposes.

Question 5

The most accurate method for allocating service department costs is the

Accepted Answer

The algebraic method, also known as the simultaneous equation method, is the most accurate for allocating service department costs because it considers the mutual services provided among all service departments, unlike the step method and direct method which do not fully account for these interdepartmental services.

Question 6

After service department costs have been allocated,what is the final step in determining full product cost?

Accepted Answer

Once service department costs have been allocated, overhead application rates for revenue-producing areas can be determined. This involves dividing the total overhead costs by a suitable cost driver, such as direct labor hours or machine hours, to arrive at an overhead application rate. This rate can then be applied to each revenue-producing department's direct labor hours, direct machine hours, or other cost driver to allocate overhead costs to the products or services produced by the department. This step completes the process of determining full product cost. Direct material and direct labor costs are already included in the product cost, and total service department costs have been allocated in the previous step.

Question 7

Which of the following methods of assigning indirect service department costs recognizes on a partial basis the reciprocal relationships among the departments?

Accepted Answer

The step method of assigning indirect service department costs recognizes partial basis the reciprocal relationships among the departments by allocating costs in steps, first assigning costs to the most used department, then to the next most used department, and so on until all costs are assigned. This method partially recognizes reciprocal relationships because it does take into account the usage of services among departments but does not fully consider all the interactions among the departments.

Question 8

The fixed costs of service departments should be allocated to production departments based on

Accepted Answer

The answer of The fixed costs of service departments should...

Question 9

Which service department cost allocation method utilizes a "benefits-provided" ranking?

Accepted Answer

The step method of service department cost allocation utilizes a "benefits-provided" ranking, where departments are ranked based on the benefits they provide to other departments, and costs are allocated accordingly, starting with the department that provides the most benefits.

Question 10

The criteria that are most often used to decide on allocation bases are?

Accepted Answer

The most common criteria used to decide on allocation bases are whether the allocation base is related to the cost being allocated, whether the allocation base is easily measurable, and whether the allocation base is equitable among the recipients of the allocated costs. Therefore, all three criteria should be considered, making choice B the best answer.

Question 11

Which of the following is not a method for allocating service department costs?

Accepted Answer

The indirect method is not a recognized method for allocating service department costs. The recognized methods include the direct method, step method, and algebraic method.

Question 12

Service departments provide functional tasks for which of the following?

Accepted Answer

The answer of Service departments provide functional tasks for which...

Question 13

The overhead allocation method that allocates service department costs without consideration of services rendered to other service departments is the

Accepted Answer

The direct method allocates service department costs directly to production departments without considering their usage of services from other service departments. The step method and reciprocal method do consider interdepartmental service usage.

Question 14

Which service department cost allocation method assigns costs directly to revenue-producing areas with no other intermediate cost pools or allocations?

Accepted Answer

The direct method assigns service department costs directly to the revenue-producing areas without using any intermediate cost pools or allocations. This method is straightforward and avoids any distortions that may arise from intermediate allocations.

Question 15

To identify costs that relate to a specific product,an allocation base should be chosen that

Accepted Answer

An allocation base that has a cause-and-effect relationship with the specific product will provide a more accurate and meaningful allocation of costs. This is because the cost can be more directly traced to the product based on the relationship between the allocation base and the cost incurred. For example, the number of machine hours used in producing a product can be a suitable allocation base for allocating manufacturing overhead costs as there is a cause-and-effect relationship between the machine usage and the overhead costs incurred in producing the product.

Question 16

All of the following objectives are reasons that service department allocations can motivate managers except to

Accepted Answer

The answer of All of the following objectives are reasons...

Question 17

Which of the following is a reason for allocating service department costs and thereby motivating management?

Accepted Answer

Allocating service department costs ensures that each department is charged for the services they use on a fair and equitable basis. This motivates management to use services efficiently and to control costs. Options A, B, and C do not specifically relate to motivating management.

Question 18

A rational and systematic allocation base for service department costs should reflect the cost accountant's consideration of all of the following except

Accepted Answer

All of the options listed (A, B, and C) should be considered when allocating service department costs in a rational and systematic way. It is important to consider each of these factors to ensure that the allocation base accurately reflects the cost relationship between service departments and revenue-producing departments. Failure to consider any of these factors could result in an unfair allocation of costs, which could impact the financial performance of the organization as a whole.

Question 19

Which service department cost allocation method assigns indirect costs to cost objects after considering interrelationships of the cost objects?

Accepted Answer

The answer of Which service department cost allocation method assigns...

Question 20

Which of the following is not an objective for computing full cost?

Accepted Answer

The answer of Which of the following is not an...

Quiz 13: Responsibility Accounting, support Department Allocations, and Transfer Pricing