Question 1

The stand-alone method of allocating determines the weights for cost allocation by considering each user of the cost as a separate entity.

Accepted Answer

The stand-alone method of allocating considers each user of the cost as a separate entity and determines the weights for cost allocation. Therefore, the statement is true.

Question 2

An advantage of the reciprocal method is that it highlights the complete reciprocated costs of support departments and how these costs differ from budgeted or actual costs of the departments.

Accepted Answer

The reciprocal method involves allocating support department costs based on both the direct and indirect services they provide to other departments. This method takes into account the complete costs of support departments, including costs that may have been overlooked or not fully accounted for in other methods. Therefore, the statement is true.

Question 3

Answer the following questions using the information below:
Harbor Corp currently leases a corporate suite in an office building for a cost of $280,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,000.
-If the stand-alone method were used,what amount of cost would be allocated to the start-up business?
A) $70,000
B) $66,000
C) $60,000
D) $74,000

Accepted Answer

The answer of Answer the following questions using the information...

Question 4

Answer the following questions using the information below:
Harbor Corp currently leases a corporate suite in an office building for a cost of $280,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,000.
-If the incremental method were used,what amount of cost would be allocated to the start-up business?
A) $20,000
B) $300,000
C) $60,000
D) $75,000

Accepted Answer

The incremental cost method allocates only the additional costs incurred due to the new usage. The start-up business increases costs by $20,000, so that is the amount allocated to them.

Question 5

Under the step-down method,once a support department's costs have been allocated,all subsequent support-department costs are allocated back to it.

Accepted Answer

Under the step-down method, once a support department's costs have been allocated, no subsequent support-department costs are allocated back to it.

Question 6

The direct method is conceptually the most precise method because it considers the mutual services provided among all support departments.

Accepted Answer

The reciprocal method is conceptually the most precise method because it considers the mutual services provided among all support departments.

Question 7

Complete reciprocated costs is the support department's own costs plus any interdepartmental cost allocations.

Accepted Answer

Complete reciprocated costs include the support department's own costs as well as any costs allocated to it from other departments.

Question 8

Under the stand-alone method of allocating common costs ________.
A) the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those users
B) disputes can arise over who is the primary user
C) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
D) the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users

Accepted Answer

Under the stand-alone method of allocating common costs, each party bears a proportionate share of the total costs in relation to their individual stand-alone costs. This method is considered fair and objective as it distributes costs based on the actual amount of resources used by each party. This method does not rank individuals based on their responsibility or primary usage, which makes it simpler and eliminates disputes over who the primary user is.

Question 9

The direct allocation method provides key information for outsourcing decisions regarding support services.

Accepted Answer

Complete reciprocal costs of a support department provide key information for outsourcing decisions regarding support services. The direct allocation method does not provide this information.

Question 10

Under the incremental method of allocating common costs ________.
A) the parties are interested in being viewed as primary users
B) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
C) the first-incremental user bears a higher proportion of the cost in comparison with the primary user
D) the primary user bears the maximum of the total cost

Accepted Answer

The answer of Under the incremental method of allocating common...

Question 11

Describe methods which may be used to allocate support costs within organizations containing multiple support departments.Discuss advantages and disadvantages of the various methods.

Accepted Answer

The answer of Describe methods which may be used to...

Question 12

Answer the following questions using the information below:
Emrald Corp currently uses a manufacturing facility costing $500,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 5%.
-If the incremental method were used,what amount of cost would be allocated to the start-up business?
A) $40,000
B) $50,000
C) $46,000
D) $42,000

Accepted Answer

The answer of Answer the following questions using the information...

Question 13

Answer the following questions using the information below:
Emrald Corp currently uses a manufacturing facility costing $500,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 5%.
-If the stand-alone method were used,what amount of cost would be allocated to the start-up business?
A) $48,000
B) $50,000
C) $50,500
D) $52,500

Accepted Answer

The answer of Answer the following questions using the information...

Question 14

A cost of operating a facility,department,activity area,or like cost object that is shared by two or more users is called a ________.
A) combined cost
B) distinct cost
C) fixed cost
D) common cost

Accepted Answer

Common costs are costs that are shared by two or more cost objects, such as users or departments. These costs cannot be easily allocated to a single user or department, and must be apportioned based on some reasonable method, such as usage or headcount. Examples include rent, utilities, and insurance costs for a shared office space.

Question 15

Craylon Corp has two service departments,S1 and S2,and two production departments,P1 and P2.
The data for April were as follows:
 $$\begin{array} { | l | l | c | c | c | c | } 
\hline & & { \text { Services provided to: } } \
\hline \text { Activity } & \text { Costs } & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \
\hline \text { S1 } & \$ 100,000 & & 20 \% & 40 \% & 50 \% \
\hline \text { S2 } & \$ 80,000 & 10 \% & & 55 \% & 25 \% \
\hline & \text { Fixed Costs } & & & & \
\hline \text { P1 } & \$ 400,000 & & & & \
\hline \text { P2 } & \$ 500,000 & & & & \
\hline
\end{array}$$ Required:
a.Set up algebraic equations in linear form for each activity.
b.Determine total costs for each department by solving the equations from part (a)using the reciprocal method.

Accepted Answer

The answer of Craylon Corp has two service departments,S1 and...

Question 16

Gotham University offers only high-tech graduate-level programs.Gotham has two principal operating departments,Engineering and Computer Sciences,and two support departments,Facility and Technology Maintenance and Enrollment Services.The base used to allocate facility and technology maintenance is budgeted total maintenance hours.The base used to allocate enrollment services is number of credit hours for a department.The Facility and Technology Maintenance budget is $350,000,while the Enrollment Services budget is $950,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
 $$\begin{array} { | l | c | c | c | c | c | } 
\hline & { \text { Services Provided: (Annually) } } \
\hline & \text { Budget } & \text { Engineering } & \begin{array} { c } 
\text { Computer } \
\text { Sciences }
\end{array} & \begin{array} { c } 
 F\&T  \
\text { Maintenance }
\end{array} & \begin{array} { c } 
\text { Enrollment } \
\text { Service }
\end{array} \
\hline \text { Engineering } & \$ 3,500,000 & & & & \
\hline \begin{array} { l } 
\text { Computer } \
\text { Sciences }
\end{array} & \$ 1,400,000 & & & & \
\hline \begin{array} { l } 
\text { F\& T } \
\text { Maintenance } \
\text { in hours) }
\end{array} & \$ 350,000 & 2,000 & 1,000 & \text { Zero } & 5,000 \
\hline \begin{array} { l } 
\text { Enrollment } \
\text { Service } \
\text { in credit hrs) }
\end{array} & \$ 950,000 & 24,000 & 36,000 & 2,000 & \text { Zero } \
\hline
\end{array}$$ Required:
a.Set up algebraic equations in linear equation form for each activity.
b.Determine total costs for each department by solving the equations from part (a)using the reciprocal method.
(Engineering= Eng; Computer Sciences = CS; Facility and Technical Maintenance = FTM; Enrollment Service = ES)

Accepted Answer

The answer of Gotham University offers only high-tech graduate-level programs.Gotham...

Question 17

Both direct and the step-down method can provide relevant information for outsourcing decisions.

Accepted Answer

Neither direct nor the step-down method can provide relevant information for outsourcing decisions.

Question 18

The step-down method allocates support department costs to only operating departments in a sequential manner.

Accepted Answer

The step-down method allocates support department costs to other support departments and operating departments in a sequential manner.

Question 19

Marshall University offers only high-tech graduate-level programs.Marshall has two principal operating departments,Commerce and Social Sciences,and two support departments,Facility and Technology Maintenance and Enrollment Services.The base used to allocate facility and technology maintenance is budgeted total maintenance hours.The base used to allocate enrollment services is number of credit hours for a department.The Facility and Technology Maintenance budget is $500,000,while the Enrollment Services budget is $900,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
 $\text { Services Provided: (Annually) }$
$\begin{array}{|l|c|c|c|c|c|}
\hline & \text { Budget } & \text { commerce } & \begin{array}{c}
\text { Social } \
\text { Sciences }
\end{array} & \begin{array}{c}
\text { F\&T } \
\text { Maintenance }
\end{array} & \begin{array}{c}
\text { Enrollment } \
\text { Service }
\end{array} \
\hline \begin{array}{l}
\text { Mar } \
\text { (in hourtenance }
\end{array} & \$500,000 & 3,000 & 6,000 & \text { Zero } & 5,000 \
\hline\begin{array}{l}
\text { Enrollment } \
\text { Service } \
\text { in credit hrs) }
\end{array} & \$ 900,000 & 25,000 & 35,000 & 2,000 & \text { Zero } \
\hline
\end{array}$ Required:
Prepare a schedule which allocates service department costs using the step-down method with the sequence of allocation based on the highest-percentage support concept.Compute the total amount of support costs allocated to each of the two principal operating departments,Commerce and Social Sciences.

Accepted Answer

The answer of Marshall University offers only high-tech graduate-level programs.Marshall...

Question 20

Tryst University offers only high-tech graduate-level programs.Tryst has two principal operating departments,Engineering and Social Sciences,and two support departments,Facility and Technology Maintenance and Enrollment Services.The base used to allocate facility and technology maintenance is budgeted total maintenance hours.The base used to allocate enrollment services is number of credit hours for a department.The Facility and Technology Maintenance budget is $450,000,while the Enrollment Services budget is $900,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
 $\text { Services Provided: (Annually) }$
$\begin{array}{|l|c|c|c|c|c|}
\hline & \text { Budget } & \text { Engineering } & \begin{array}{c}
\text { Social } \
\text { Sciences }
\end{array} & \begin{array}{c}
\text { F\&T } \
\text { Maintenance }
\end{array} & \begin{array}{c}
\text { Enrollment } \
\text { Service }
\end{array} \
\hline \begin{array}{l}
\text { Mar } \
\text { (in hourtenance }
\end{array} & \$ 450,000 & 3,000 & 6,000 & \text { Zero } & 1,000 \
\hline\begin{array}{l}
\text { Enrollment } \
\text { Service } \
\text { in credit hrs) }
\end{array} & \$ 900,000 & 25,000 & 35,000 & 2,000 & \text { Zero } \
\hline
\end{array}$ Required:
Use the direct method to allocate support costs to each of the two principal operating departments,Engineering and Social Sciences.Prepare a schedule showing the support costs allocated to each department.

Accepted Answer

The answer of Tryst University offers only high-tech graduate-level programs.Tryst...

Quiz 15: Allocation of Support-Department Costs, common Costs, and Revenues

The stand-alone method of allocating determines the weights for cost allocation by considering each user of the cost as a separate entity.

An advantage of the reciprocal method is that it highlights the complete reciprocated costs of support departments and how these costs differ from budgeted or actual costs of the departments.

Under the step-down method,once a support department's costs have been allocated,all subsequent support-department costs are allocated back to it.

The direct method is conceptually the most precise method because it considers the mutual services provided among all support departments.

Complete reciprocated costs is the support department's own costs plus any interdepartmental cost allocations.

Under the stand-alone method of allocating common costs ________.

The direct allocation method provides key information for outsourcing decisions regarding support services.

Under the incremental method of allocating common costs ________.

Describe methods which may be used to allocate support costs within organizations containing multiple support departments.Discuss advantages and disadvantages of the various methods.

A cost of operating a facility,department,activity area,or like cost object that is shared by two or more users is called a ________.

Both direct and the step-down method can provide relevant information for outsourcing decisions.

The step-down method allocates support department costs to only operating departments in a sequential manner.