Braveheart Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: \[\begin{array}{l} & \text { Mixing } & \text { Finishing } \\ \text { Long-run capacity available }{ }^{*} & 18,000 & 12,000 \\ \text { Budgeted }^{*} & 12,000 & 10,500 \\ \text { Actual }^{*} & 15,000 & 9,000\\ \text { *in labor hours } \end{array}\] Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of variable maintenance costs allocated to the Mixing Department should be:

A) $48,000 B) $62,500 C) $60,000 D) $72,000 A) $48,000 B) $62,500 C) $60,000 D) $72,000

Riggs Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: $\begin{array}{lll}&\text { Mixing }&\text { Finishing }\\ \text { Long-run capacity available }{ }^{*}&18,000&12,000\\ \text { Budgeted } & 12,000 & 10,500 \\ \text { Actual }^{*} & 15,000 & 9,000\\\text { *in labor hours } \end{array}$ Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of fixed maintenance costs allocated to the Finishing Department should be:

A) $14,000 B) $18,000 C) $11,250 D) $12,000 A) $14,000 B) $18,000 C) $11,250 D) $12,000

Laugh Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($70,000) pooled together to arrive at the following information: \[\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\ \text { Setups } \end{array} & \begin{array} { l } \text { Number of } \\ \text { Components } \end{array} & \begin{array} { l } \text { Number of } \\ \text { DLH } \end{array} \\ \text { Standard } & 20 & 15 & 375 \\ \text { Deluxe } & 30 & 45 & 225 \\ \text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 9,000 \end{array}\] If activity- based costing is used, is the overhead rate per component.

A) $117 B) $500 C) $600 D) $60 A) $117 B) $500 C) $600 D) $60

Williams Company has two service departments, Maintenance and Personnel, as well as 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: $\begin{array}{lllll} &\text { Maintenance }&\text { Personnel }&\text { Mixing }&\text { Finishing }\\ \text { Direct dept.costs }&\$126,000&\$105,000&\$175,000&\$84,000\\ \text { Square footage } & 800 & 400 & 1,600 & 1,200 \\ \text { Number of employees } &8 & 12 & 24 & 32 \end{array}$ If the step- down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Finishing is:

A) $57,000 B) $31,500 C) $42,750 D) $47,250 A) $57,000 B) $31,500 C) $42,750 D) $47,250

Reagan Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: \[\begin{array} { l l l l } \text { Product } & \begin{array} { l } \text { Number of } \\ \text { Setups } \end{array} & \begin{array} { l } \text { Number of } \\ \text { Components } \end{array} & \begin{array} { l } \text { Number of } \\ \text { DLH } \end{array} \\ \text { Standard } & 22 & 8 & 375 \\ \text { Deluxe } & 28 & 12 & 225 \\ \text { Costs per pool } & \$ 15,000 & \$ 36,000 & \$ 9,000 \end{array}\] is the total amount of overhead costs assigned to the deluxe model assuming activity- based costing is used.

A) $37,500 B) $26,625 C) $33,375 D) $22,500 A) $37,500 B) $26,625 C) $33,375 D) $22,500

Johnson Company has two departments, Arrive and Go. Relevant information is presented below: \[\begin{array} { l l l } & \text { Arrive } & \text { G } 0 \\ \text { Budgeted Sales } & \$ 400,000 & \$ 2,000,000 \\ \text { Actual Sales } & \$ 300,000 & \$ 2,100,000 \end{array}\] Total advertising expense is $300,000. If the allocation base is changed from budgeted sales to actual sales, the amount allocated to the Arrive Department will:

A) increase by $12,500 B) decrease by $12,500 C) decrease by $25,000 D) increase by $25,000 A) increase by $12,500 B) decrease by $12,500 C) decrease by $25,000 D) increase by $25,000

Exam 12: Cost Allocation

Braveheart Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: Mixing Finishing Long-run capacity available 18,000 12,000 12,000 10,500 15,000 9,000 *in labor hours Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of variable maintenance costs allocated to the Mixing Department should be:

(Multiple Choice)

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Question 21

is a traditional way of allocating joint costs to products.

(Multiple Choice)

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Question 22

A cost pool is a group of individual costs that is allocated to cost objectives using multiple cost drivers.

(True/False)

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Question 23

The fixed cost of operating the maintenance facility of Cuyahoga County Hospital is $3,900,000 annually. It incurs variable costs at the rate of $40 per labor- hour of maintenance. The facility averages 60,000 maintenance hours a year. Budgeted and actual hours per user were as follows: Budgeted hours Actual hours Operating 16,000 15,100 Patient care 42,000 45,000 Administration 2,000 1,800 Total 60,000 61,900 Required: a. How much would the Patient Care Department receive in maintenance costs if a single rate is used based on budgeted hours? b. How much would the Operating Department receive in maintenance costs if a dual rate is used with fixed costs allocated on budgeted hours and variable costs allocated on actual hours?

(Essay)

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Question 24

Riggs Company has two production departments, Mixing and Finishing, served by one maintenance department. Budgeted fixed costs for the maintenance department were $30,000, and the variable cost per labor hour was $4.00. Other relevant data are as follows: Mixing Finishing Long-run capacity available 18,000 12,000 Budgeted 12,000 10,500 15,000 9,000 *in labor hours Actual maintenance department costs were $36,000 fixed and $100,000 variable. The amount of fixed maintenance costs allocated to the Finishing Department should be:

(Multiple Choice)

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Question 25

should be used to allocate fixed costs.

(Multiple Choice)

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Question 26

What is the traditional approach to cost application?

(Essay)

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Question 27

Cleveland College recently leased a photocopy machine for $1,500 per month plus $0.04 per copy. Additional variable operating costs were $0.02 per copy. Cleveland College estimated it would produce a total of 30,000 copies per month. The Physics Department estimated it would produce 6,000 copies, but actually produced only 4,000 copies. If fixed and variable cost pools are allocated separately, then the amount of fixed costs allocated to the Physics Department should be:

(Multiple Choice)

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Question 28

When allocating fixed costs, a predetermined lump- sum allocation based on budgeted usage should be used.

(True/False)

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Question 29

Laugh Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($70,000) pooled together to arrive at the following information: Product Number of Setups Number of Components Number of DLH Standard 20 15 375 Deluxe 30 45 225 Costs per pool \ 25,000 \ 36,000 \ 9,000 If activity- based costing is used, is the overhead rate per component.

(Multiple Choice)

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Question 30

When using the "ability to bear" philosophy in allocating central service costs, actual sales are preferable to budgeted sales.

(True/False)

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Question 31

Direct- labor hours are a good cost driver choice for overhead costs in modern, highly automated departments.

(True/False)

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Question 32

A cost driver used for allocating costs

(Short Answer)

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Question 33

Williams Company has two service departments, Maintenance and Personnel, as well as 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: Maintenance Personnel Mixing Finishing Direct dept.costs \1 26,000 \1 05,000 \1 75,000 \8 4,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step- down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Finishing is:

(Multiple Choice)

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Question 34

When using the step- down method, once a service department's costs are allocated to other departments, nothing is ever allocated back to it.

(True/False)

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Question 35

Reagan Company manufactures two models of pens-a standard and a deluxe model. Three activities have been identified as cost drivers and the related overhead costs ($60,000) pooled together to arrive at the following information: Product Number of Setups Number of Components Number of DLH Standard 22 8 375 Deluxe 28 12 225 Costs per pool \ 15,000 \ 36,000 \ 9,000 is the total amount of overhead costs assigned to the deluxe model assuming activity- based costing is used.

(Multiple Choice)

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Question 36

Products or services are the final cost objectives.

(True/False)

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Question 37

Allocation of costs to cost objectives may be described as apportion or attribute.

(True/False)

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Question 38

Johnson Company has two departments, Arrive and Go. Relevant information is presented below: Arrive G 0 Budgeted Sales \ 400,000 \ 2,000,000 Actual Sales \ 300,000 \ 2,100,000 Total advertising expense is $300,000. If the allocation base is changed from budgeted sales to actual sales, the amount allocated to the Arrive Department will:

(Multiple Choice)

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Question 39

The greatest virtue of the step- down method is:

(Multiple Choice)

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Question 40

is a traditional way of allocating joint costs to products.

A cost pool is a group of individual costs that is allocated to cost objectives using multiple cost drivers.

should be used to allocate fixed costs.

What is the traditional approach to cost application?

When allocating fixed costs, a predetermined lump- sum allocation based on budgeted usage should be used.

When using the "ability to bear" philosophy in allocating central service costs, actual sales are preferable to budgeted sales.

Direct- labor hours are a good cost driver choice for overhead costs in modern, highly automated departments.

A cost driver used for allocating costs

When using the step- down method, once a service department's costs are allocated to other departments, nothing is ever allocated back to it.

Products or services are the final cost objectives.

Allocation of costs to cost objectives may be described as apportion or attribute.

The greatest virtue of the step- down method is:

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

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