Exam 7: Allocating Costs of Support Departments and Joint Products

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 Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the Maintenance Department allocated to Department P1 is

A secondary product recovered during the manufacturing of a primary product during a joint process is called a(n): __________ .

Licorice, Inc., has two producing departments, P1 and P2, and two support departments, A and B. Department A serves Departments P1 and P2 in the percentages 45 percent and 55 percent. Department B serves Departments A, P1, and P2 in the percentages 15 percent, 55 percent, and 30 percent. Direct department costs for P1, P2, A, and B are $90,000, $84,000, $15,000, and $10,000, respectively. Compute the total costs to be allocated from Department A.

Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. What is the gross profit for Dulls assuming the constant gross margin percentage method is used?

Andover, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: $\text { Support department hours used: }$ Department X 12,000 Department Y 4,000 Total hours Support department costs: Actual support department costs \ 48,000 Budgeted fixed department costs \ 20,000 Budgeted variable rate per hour \ 2.50 Normal support department usage is 8,000 hours each for Department X and Department Y. Assuming the direct method is used and the purpose is performance evaluation, support department costs allocated to Department X are

MistyMoss Company produces two products, cheese and butter, in a single process. In the month of January, the joint costs related to the process amounted to $81,000. In addition, 5,000 pounds of cheese and 4,000 pounds of butter were produced. Separable processing costs beyond the split-off point were: cheese, $15,000; butter, $15,000. Cheese sells for $14 per pound; butter sells for $15 per pound. Required: a.Allocate the joint costs using the net realizable value method. b.Allocate the joint costs using the physical units method.

Activities or variables within a producing department that provoke the incurrence of support costs are called __________ .

The three methods of allocating support center costs to producing departments are the direct, sequential, and reciprocal methods.

Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use 165,000 and 35,000 from the trust area. Assuming a single charging rate is used, what would be the charge per page? (round to the nearest cent)

Santiago Manufacturing prices its products at full cost plus 40 percent. The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Departments Producing Departments Overhead costs \ 20,000 \ 50,000 \ 90,000 \ 120,000 Square feet 2,000 2,400 4,000 12,000 Number of employees 20 30 60 40 Direct labor hours - - 10,000 6,400 Machine hours - - 6,000 10,800 Support Department A's costs are allocated based on square feet, and Support Department B's costs are allocated based on number of employees. Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours. One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $45 per unit, and direct labor is $20 per unit. If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be

Cumadin Corporation, which manufactures products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2018: Product Units Produced Sales Value at Split-Off 10,000 \ 5,000 6,000 2,500 16,000 3,000 Z 8,000 4,500 What is the amount of joint costs assigned to Product X using the sales-value-at-split-off method?

The use of a multiple charging rate is needed, one for variable costs, and one for fixed costs.

Which of the following is NOT a benefit of the costs of support departments being allocated to production departments?

Which of the following cost allocation methods allocates support department costs only to the producing departments?

Algonquin 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 net realizable value net realizable value method?

Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: 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 first and second using the physical units method?

Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $\quad \$ 34$ per trip Fixed costs $\quad \$ 143,360$ Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Using a single charging rate, how much will be charged to the West Sales Territory?

Sigma, Inc., has two support departments, the Administrative Department and the Personnel Department, and two producing departments, the Machining Department and the Blending Department. The Administrative Department costs of $50,000 are allocated on the basis of standard service used. The Personnel Department costs of $10,000 are allocated on the basis of number of employees. The direct costs of Machining Department and Blending Department are $30,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows: Administrative Personnel Machining Blending Department Department Department Department Standard service hours used 200 100 150 250 Number of employees 10 20 15 10 Directlabor hours 100 80 150 200 Using the direct method, allocate the costs of the Administrative and Personnel departments to the Machining departments.

Hibernation Company incurred $500,000 to manufacture the following products in a joint process: Selling Price Product Units Produced Weight per Unit per Unit 1,250 81. \ 5 2,500 61. 10 3,750 4 lbs. 10 5,000 21. 5 How much joint cost would be allocated to Product I based on the physical units method?

Which of the following statements is true of the allocation of fixed support department costs?