Exam 7: Allocating Costs of Support Departments and Joint Products

Which of the following would NOT be a criteria used to rank departments to determine order of allocation under the sequential method?

The major objective(s) of allocations are

The overhead rate may be computed once allocation from support service cost to producing department has been performed.

Which of the following would be the most appropriate base for allocating the costs of the maintenance department?

Support department __________ costs are allocated on the basis of original capacity.

The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: Percentage of Service Used by Dept. Costs Admin. Pers. Acctg. Check. Sav. Loc Administration \ 40,000 - 10 10 40 20 21 Personnel 23,000 10 - 10 20 40 21 Accounting 30,000 10 10 - 20 20 41 Checking 41,000 Savings 25,000 Loans 16,000 The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration, personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method? (Round to two decimal places.)

Producing departments create products and services to make and sell.

Which of the following guidelines must be considered while determining the basis to be used to allocate support department costs?

Rules of financial reporting (GAAP) require

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 Number of employees 10 20 90 90 Direct labor hours 50 50 250 250 What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

Laredo Corporation, which manufactures products W, X, Y, and Z through a joint process costing $24,000, has the following data for 2018: Product Units Produced Total Sales Value at Split-Off W 10,000 \ 5,000 X 6,000 2,500 Y 16,000 3,000 Z 8,000 4,500 What is the amount of joint costs assigned to product W using the physical units method?

Costs that are easily traced to individual products are called separable costs.

Suppose that a Plywood manufacturer processes wood pulp into four grades of Plywood totaling 500,000 board feet as follows at a joint cost of $450,000: Grade Board Feet Final Sales Value First and second 75,000 \ 56,250 No. 1 common 200,000 180,000 No. 2 common 100,000 105,000 No. 3 common 125,000 127,500 What amount of joint costs will be allocated to No. 1 common using the final sales value method?

Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 Support department costs NOT allocated to the two copy centers are:

Restaurant Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were X - $10,000; Y - $20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit. What amount of joint costs will be allocated to Product X using the physical units method?

Which of the following methods of cost allocation based on market value is used when there is no ready market price available for the individual products at the split-off point?

A common cost occurs

Diane's Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: Maint. Person. Dept. Dept. Dest. Dept. Standard service hours used 100 75 600 300 Number of employees 50 100 150 150 Direct labor hours 125 125 500 250 What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?

Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (brochures made) are as follows: Brochure Center 1 Brochure Center 2 Normal activity (brochures) 1,200,000 800,000 Actual activity (brochures) 1,000,000 880,000 For purposes of performance evaluation, fixed costs allocated to Brochure Center 1 are:

Support departments