Question 1

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

Accepted Answer

Service department allocations are not primarily used to determine divisional profitability; they are more about cost control and encouraging efficient use of resources.

Question 2

Which service department cost allocation method assigns indirect costs to cost objects after considering interrelationships of the cost objects?
$\text {\underline{Algebraic method. } }$                               $\text {\underline{ Step method} }$

Accepted Answer

The algebraic method and the step method both consider the interrelationships of cost objects when assigning indirect costs. The algebraic method does so through simultaneous equations, while the step method allocates costs sequentially from the service department providing the most services to other departments to the least.

Question 3

The criteria that are most often used to decide on allocation bases are?
$\text {\underline{Benefits received. } }$               $\text {\underline{Fairness } }$                      $\text {\underline{ Causal relationships.} }$

Accepted Answer

The most common criteria used to decide on allocation bases are benefits received and causal relationships. Fairness is also important because it ensures that costs are allocated in an equitable and just manner. Therefore, the best choice is B, which includes all three criteria. Option A is not correct because it does not consider fairness as a criterion. The option C is wrong because it does not consider the causal relationship as a criterion. Finally, option D is not right because it does not include any of the three criteria.

Question 4

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 given options are important considerations when allocating service department costs. Ignoring any of these factors may result in an inequitable allocation of costs and distort the cost of goods or services produced by the revenue-producing departments. Therefore, all of these considerations should be taken into account when developing a rational and systematic allocation base for service department costs.

Question 5

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 6

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 a functional task that is typically provided by a service department. Service departments are responsible for providing support services such as purchasing, warehousing, and distributing to other internal units, but they do not typically engage in manufacturing activities.

Question 7

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 product will help in accurately identifying the costs that are related to the specific product. This is because the allocation base used will be based on the cost driver that has a direct relationship to the production of the product. For example, the number of machine hours used in the production of the product can be used as the allocation base for allocating manufacturing overhead costs. This would have a cause-and-effect relationship with the product's production as the more machine hours used, the higher the manufacturing overhead costs.

Question 8

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. It involves identifying the department that provides the most service to other departments and allocating their costs first, then moving on to the next department until all costs are allocated.

Question 9

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 only to production departments and does not consider services rendered to other service departments. It is the simplest and least accurate method of overhead allocation.

Question 10

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 11

Service departments provide functional tasks for which of the following?
$\text {\underline{Internal units } }$                             $\text {\underline{ External units} }$

Accepted Answer

Service departments primarily provide functional tasks for internal units within an organization, such as HR, IT, and finance services, rather than directly serving external units or customers.

Question 12

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

Accepted Answer

After service department costs have been allocated, the final step in determining full product cost is to determine overhead application rates for revenue-producing areas. This involves calculating how much overhead should be allocated to each revenue-producing department based on its use of the service department resources. Once this is complete, the total product cost can be calculated by adding together direct material, direct labor, and overhead costs.

Question 13

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

Accepted Answer

Allocating service department costs helps to determine controllable costs, provide information on cost recovery, and reflect production's fair share of costs. Regulations may require full costing in some instances but this is not a reason in itself to allocate service department costs.

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 revenue-producing areas without any intermediate cost pools or allocations. This method is considered simple and straightforward but may not account for the shared usage of service departments by multiple revenue-producing areas.

Question 15

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 takes into consideration the reciprocal relationships among the departments by allocating costs in multiple steps instead of just one. This method recognizes that each service department provides services to other service departments, and those services have a cost. By taking this into account, the step method is able to allocate costs in a more accurate and fair manner than the other methods listed.

Question 16

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 17

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

Accepted Answer

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

Question 18

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 19

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

Accepted Answer

Allocating service department costs allows for a fair and equitable reflection of the usage of services by different departments, motivating management to use services efficiently and effectively. Cost recovery (A) and meeting regulations (C) may be benefits of cost allocation, but they are not primary reasons for motivating management. Providing relevant information in determining corporate-wide profits (B) is a benefit of cost allocation, but it is not directly related to motivating management.

Question 20

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...

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