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Exam 12: Cost Allocation

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Question 51

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The preferred guidelines for allocating service department costs to user departments include ________.

A) allocating variable-cost and fixed-cost pools separately
B) establishing details about cost allocation after providing services
C) using actual costs for allocation
D) none of the above

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Question 52

Multiple Choice

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Patricia Company makes three types of products.The company has two types of customers.The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations.The following data are available: What is the gross profit margin for all three products for Customer Type 2?

A) $450
B) $1,000
C) $7,000
D) $8,450

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Question 53

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Martinez Company has two service departments,Maintenance and Personnel.Martinez Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees.The following information has been gathered for the current year: Assume the step-down method is used to allocate service department costs and the Maintenance Department is allocated first.Then the amount of cost allocated from the Personnel Department to the Maintenance Department would be ________.

Examples of service departments in a large company do NOT include ________.

Ranger Company produces three products from a joint process.Products Simple and Complex are considered main products.Product Deluxe is a by-product.Joint-processing costs should be allocated to ________.

Cougar Company has two service departments,Maintenance and Cafeteria,as well as two production departments,Mixing and Finishing.Maintenance Department costs are allocated based on direct labor hours and Cafeteria Department costs are allocated based on number of employees.The following data are available: Assume the step-down method of allocating service departments' costs is used.The Maintenance Department renders the greatest service and is allocated first. Required: A)Determine the total costs of the Mixing Department after allocating the service departments' costs. B)Determine the total costs of the Finishing Department after allocating the service departments' costs.

The direct method of allocating service department costs to producing departments ignores ________.

When allocating fixed costs from service departments to user departments,a predetermined lump-sum allocation based on the long-range capacity available to the user should be used.

Rayburn Company has two departments.Relevant information is presented below: Corporate management salaries are $3,000,000.The salaries are allocated based on sales using the preferred approach.What amount of salaries is allocated to Department 1?

The use of cost drivers for central corporate support costs such as division revenue or total assets of a division represent an "ability to bear" philosophy.

________ costs relate to more than one product and cannot be separately identified with an individual product.

When allocating service department costs to user departments,fixed costs should be allocated using budgeted cost rates times the actual cost driver level.

Power costs can be allocated using megawatt hours as the cost driver.

Joint costs include all inputs of material,labor and overhead that are incurred after the split-off point.

The direct method of allocating service department costs ignores other service departments when allocating service departments' costs to user departments.

Yesterday Company makes three types of products.The company has two types of customers.The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations.The following data are available: What is the cost to serve for Customer Type 2?

Revenues from the by-product less separable costs associated with the by-product are added to the cost of the main products.

James Company has two production departments called Mixing and Finishing.The maintenance department serves both production departments.Budgeted fixed costs for the maintenance department are $30,000.Budgeted variable costs for the maintenance department are $5.00 per labor hour.Actual maintenance department costs are $36,000 fixed and $100,000 variable.Other relevant data follow: The amount of variable maintenance department costs allocated to the Mixing Department should be ________.

The phrase "cost distribution" refers to the allocation of total departmental costs to revenue-producing products or services.

The Technical Services Department of Michigan State University leased a photocopy machine for $2,000 per month plus $0.04 per copy.Additional budgeted variable operating costs were $0.02 per copy.The Technical Services Department estimated the machine would produce 30,000 copies per month.The Accounting Department estimated is would make 6,000 copies per month but actually made 4,000 copies.Assume fixed and variable cost pools are allocated separately.What is the amount of fixed cost allocated to the Accounting Department for the month?