Exam 7: Allocating Costs of Support Departments and Joint Products

The cost of crude oil used in producing gasoline products is an example of

The following information pertains to Longboat Company: Support Departments Producing Departments Personnel Maintenance Fabrication Assembly Budgeted overhead \ 40,000 \ 72,000 \ 140,000 \ 160,000 Direct 1abor hours 2,000 2,500 8,000 10,000 Machine hours - - 12,000 8,000 Number of employees 4 5 15 25 Longboat Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round amounts to dollars.) If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization?

Which of the following is an advantage of the relative market value approach to joint cost allocation?

Which of the following allocation methods assumes "step-down" interdepartmental services?

Producing departments provide essential services for support departments.

Deli 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 and sold. 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 is the gross profit of product Y assuming the physical units method is used?

Products produced simultaneously by the same process up to a point are called __________ products.

Support department cost to the producing departments is(are) called:

McHugh Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: Building Personnel Dept.P1 Dept. P2 Space occupied 2,000 10,000. 120,000 70,000 Employees 6 10 80 50 If McHugh Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is

Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet. Data on direct department costs, number of employees, and space occupied are as follows: S1 S2 P1 P2 Direct dept. costs \ 7,500 \ 11,000 \ 27,500 \ 30,000 Number of employees 10 5 20 25 Space occupied (sq. ft.) 1,000 500 1,500 2,500 If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

Lithium Company has two support departments, the Maintenance Department and the Security Department, and two producing departments, Molding and Finishing. Standard service hours used by the departments is considered the basis to allocate Maintenance Department costs of $40,000 and the number of employees in each department is considered the basis to allocate Security Department costs of $24,000. The direct costs of the Molding Department and the Finishing Department are $96,000 and $105,000, respectively. Data on standard service hours and number of employees are as follows: Maintenance Security Molding Finishing Department Department Department Department Standard service hours used 200 100 850 1,150 Number of employees 15 20 450 350 Direct labor hours 100 50 1,150 1,350 Calculate the total overhead costs associated with the Molding Department after allocating the Maintenance and Personnel Department costs using the direct method.

The sequential method allocates costs in ranking order of support departments.

Which of the following is an example of a producing department in a manufacturing firm?

Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What is S1's cost equation?

The reciprocal method of allocation recognizes only some of the support departments' interactions.

Which of the following is a by-product?

The following information pertains to Amon Schrock Corporation: Support Departments Producing Departments Personnel Maintenance Fabrication Assembly Budgeted overhead \ 80,000 \ 144,000 \ 280,000 \ 320,000 Direct labor hours 4,000 5,000 16,000 20,000 Machine hours - - 24,000 16,000 Number of employees 16 20 60 100 Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2018 for its three departments: Sportswear Lingerie Appliance: Sales \ 160,000 \ 120,000 \ 120,000 Direct adverti sing costs \ 7,000 \ 12,000 \ 3,000 Newspaper ad space 62\% 20\% 18\% How much of the indirect advertising costs will be allocated to the Lingerie Department if direct advertising costs is the activity driver? (Round to the nearest dollar if necessary)

Allocation is not necessary when using JIT manufacturing.