Exam 11: Service Department and Joint Cost Allocation

Fantasy Manufacturing produces three products in a joint operation. Information regarding the products appears below: Required: Allocate the joint costs using the net realizable value method.

Which of the following statements regarding accounting for by-products is true?

Franklin Corporation has three operating departments (Fabricating, Assembly, and Finishing) and two service departments (Custodial and Administrative). The following information has been provided: Allocations are based on the following: Custodial: $\quad$ Square feet Administrative: $\quad$ Number of employees Required: Franklin has been approached by Sparkle Cleaning to outsource the custodial service. Assuming all costs are variable, what is the relevant cost of the custodial department to compare with the Sparkle Cleaning bid?

The Maryville Construction Company occupies 85,000 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Maryville is as follows: Rent paid for the area used is $720,000. - How much rent is allocable to the assembly department using the direct method of allocation?

Which of the following cost items is not allocable as joint costs when a single manufacturing process produces several main products and several by-products?

Describe two methods of accounting for by-products. What effects do these methods have on the allocation of the joint cost to the main products?

Cordner Corporation has two production departments, P1 and P2, and two service departments, S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Proportion of Services Used by: Department Direct costs S1 S2 P1 P2 S1 \ 60,000 0.70 0.10 0.20 S2 \ 100,000 0.20 0.30 0.50 P1 \ 160,000 P2 \ 140,000 - Under the direct method of cost allocation, the amount of S1 costs allocated to P1 would be:

Which of the following would be an appropriate cost-allocation base for allocating the cost of the company cafeteria?

Bonanza Co. manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as follows: PRODUCTS TOTAL Units produced 20,000 20,000 10,000 50,000 Joint costs ? ? ? \ 262,000 Sales value at split-off \ 300,000 \ 150,000 \ 10,000 \ 460,000 Joint costs were allocated using the net realizable value method at the split-off point. The joint costs allocated to product X were

The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Direct Costs Label Subassemblies \ 550,000 P1 Final assembly 775,000 P2 Marketing 285,000 P3 Building occupancy 85,000 S1 Research \& development 120,000 S 2 Supervision 45,000 S3 Use of services by other departments is as follows. - The equation for department P2 (final assembly) is:

Which of the following best describes the objective of joint cost allocation?

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

Jack Donaldson owns and operates Jack's Abstracting Service. Jack's two revenue generating operations (Abstracting Services and Closing Services) are supported by two service departments: Clerical and Custodial. Costs in the service departments are allocated in the following order using the designated allocation bases. Clerical: number of transactions processed. Custodial: square footage of space occupied. Average and expected activity levels for next month are as follows: Required: Use the reciprocal method to allocate the service department costs to the revenue generating departments. Provide the total costs for the revenue departments.

Joint products and by-products are produced simultaneously by a single process or series of processes and:

The Mallak Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were: Additional Processing Product Weight Sales Costs P 300,000 \ 245,000 \ 200,000 Q 100,000 30,000 -0- R 100,000 175,000 100,000 - Assume Q is a by-product and Mallak uses the cost reduction method of accounting for by-product cost. If estimated net realizable value is used, how much of the joint costs would be allocated to product R?

Palace Company has two service departments and two user departments. The number of employees in each department is: Personnel 10 Cafeteria 25 Producing Department A 265 Producing Department B 250 550 The fixed costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $37,125 during a given period, the amount of cost allocated to the Cafeteria under the step method would be:

The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. Maintenmes Accounting A B Machine hours 480 20 2,300 200 Number of employees 2 2 8 4 - What is the Maintenance Department's cost allocated to Department B (rounded to the nearest whole dollar) using the step method and assuming the Maintenance Department's costs are allocated first?

Which of the following methods provides no data for service departments to monitor each other's costs?

Tanner Corporation produced 3,660 units, consisting of three separate products, in a joint process for the year. The market for these products was so unstable that it was not practical to estimate the selling price of the products. A cost of $425,000 was incurred in the joint process. Product X's production was 80% of product Y's while product Z's production was 125% of product Y's. What is the amount of the joint cost allocable to product X (rounded to the nearest whole dollar) assuming Tanner uses the physical quantities method of allocation?

The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. Maintenmes Accounting A B Machine hours 480 20 2,300 200 Number of employees 2 2 8 4 - What is the Maintenance Department's cost allocated to Department A using the direct method?