Exam 12: Cost Allocation

A by- product:

Hughes Company has two departments, Come and Go. Relevant information is presented below: Come 0 Budgeted Sales \ 400,000 \ 2,000,000 Actual Sales \ 300,000 \ 2,100,000 If the total advertising expense is $300,000 and it is allocated on the basis of sales using the preferred method, then the amount allocated to the Go Department should be:

Billy 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: Number of Number of Number of Product Setups Components 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 setup.

is a method for allocating service department costs that ignores other service department's costs when any given service department's costs are allocated to the revenue- producing departments.

Rowan 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 375 Deluxe 30 45 225 Costs per pool \ 25,000 \ 36,000 \ 9,000 If activity- based costing is used, is the pool overhead rate per direct labor hour.

The step- down method sequence of allocations begins with the service department that renders the greatest service to the greatest number of service departments.

Hola 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 \ 50,400 \ 33,600 \ 42,000 \ 70,000 Square foot age 1,600 800 3,200 2,400 Number of employees 16 24 48 64 If the direct method is used to allocate costs, then the cost of the amount of overhead allocated from Maintenance to Mixing would be:

Units that exist only to support other departments

Dachshund Company manufactures three products from a joint process. Joint costs for the year amounted to $250,000. The following data are also available: Sales V alue at Product Units Produced Split- off \ 70,000 3,000 \ 30,000 2,000 \ 100,000 Assuming the physical- units method of allocating joint costs, the amount of joint costs allocated to product Z would be:

The preferred cost driver for central services is either actual or estimated usage.

Companies must assign all production costs and only production costs for external financial reporting purposes.

The best cost driver for janitorial services is square feet.

Cost allocation base refers to the:

Tambien 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 \ 50,400 \ 33,600 \ 42,000 \ 70,000 Square footage 1,600 800 3,200 2,400 Number of employees 16 24 48 64 If the step- down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Personnel is:

Strongsville 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. Strongsville 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 is the amount of variable cost allocated to the Physics Department:

Public relations and top corporate management overhead are examples of central services.

Macho Company has two service departments, Maintenance and Cafeteria, as well as two production departments, Mixing and Finishing. Maintenance Department costs are allocated based on direct- labor hours and Cafeteria Department costs are allocated based on number of employees. The following information is also available: Maintenance Cafeteria Mixing Finishing Direct dept.costs \ 3,500 \ 2,800 \ 1,200 \ 400 Direct-lab or hours 180 150 120 80 Number of employees 36 30 24 19 Required: Assuming the step- down method of allocating costs and the Maintenance Department renders the greatest service, determine the amount of each service department's costs that will be allocated to each production department.

The relative- sales- value method requires a common physical unit for measuring the output of each product.