Exam 17: Allocation of Support Activity Costs and Joint Costs

Use the following information to answer the following Questions The Xtra Store has a Human Resources Department and a Janitorial Department that provide service to three sales departments. The Human Resources Department cost is allocated on the basis of employees, and the Janitorial Department cost is allocated on the basis of space. The following information is available: -Using the step-down method and assuming the Human Resources Department is allocated first, the amount of Janitorial cost allocated to Sales Department no. 2 is:

Which of the following methods accounts for 100% of the services that occur between service departments?

Claremore Electronics, Inc. manufactures gauges for automobile dashboards. The company has two production departments, Molding and Assembly. There are three service departments: Human Resources, Maintenance, and Engineering. Usage of services by the various departments follows. The budgeted costs in Claremore's service departments are: Human Resources, $180,000; Maintenance, $270,000; and Engineering, $200,000. The company rounds all calculations to the nearest dollar. Required: A. Use the direct method to allocate Claremore's service department costs to the production departments. B. Determine the proper departmental sequence to use in allocating the company's service costs by the step-down method. C. Ignoring your answer in part "B," assume that Human Resources costs are allocated first, Maintenance costs second, and Engineering costs third. Use the step-down method to allocate Claremore's service department costs.

Clandestine Corporation allocates joint costs by using the net-realizable-value method. In the company's Texas plant, products D and E emerge from a joint process that costs $250,000. E is then processed at a cost of $220,000 into products F and Required: A. Allocate the $220,000 processing cost between products F and B. From a profitability perspective, should product E be processed into products F and G? Show your calculations. C. Assume that the net realizable value associated with E is zero. How would you allocate the joint cost of $250,000? G. G. Data pertaining to D, F, and G follow. Required:

Consider the following statements about service department costs: I. The costs of the Human Resources Department in a manufacturing organization must be allocated to production departments in order to achieve a correct costing of inventory. II. The allocation of service department costs requires that an organization select both an allocation base and an allocation method. III. Service department cost allocations are more relevant for firms involved in service industries (e.g., repair, health care) than for those involved with manufacturing. Which of the above statements is (are) correct?

Tempest Industries has two service departments (General Factory and Human Resources) and two production departments (Machining and Assembly). The company uses the direct method of service-department cost allocation, allocating General Factory cost on the basis of square feet and Human Resources cost on the basis of employees. Budgeted allocation-base and operating data for the four departments follow. Additional information: · Budgeted costs of General Factory and Human Resources respectively amount to $1,560,000 and $950,000. · The anticipated overhead costs incurred directly in the Machining and Assembly Departments respectively total $3,650,000 and $2,340,000. · The manufacturing overhead application bases used by Tempest's production departments are: Machining, machine hours; Assembly, labor hours. · Company policy holds that a department's overhead application rate is based on a department's own overhead plus an allocated share of service-department cost. Required: A. Allocate the company's service-department costs to the producing departments. B. Compute the overhead application rates for Machining and Assembly.

The step-down method of service department cost allocation completely ignores the provision of services by one service department to another service department.

The joint-cost allocation method that recognizes the revenues at split-off but does not consider any further processing costs is the:

Use the following information to answer the following Questions Aldo Industries, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows. -Assuming use of the step-down method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

Use the following information to answer the following Questions Stoney Brook Company produces two products (X and Y) from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Joint manufacturing costs for the year were $60,000. Sales values and costs were as follows: -If the joint production costs are allocated based on the physical-units method, the amount of joint cost assigned to product X would be:

A company that uses activity-based costing would likely allocate costs from activity-cost pools to products and services.

When allocating joint costs, Feinberg calculates the final sales value of the various products manufactured and subtracts appropriate separable costs. The company is using the:

Use the following information to answer the following Questions The Xtra Store has a Human Resources Department and a Janitorial Department that provide service to three sales departments. The Human Resources Department cost is allocated on the basis of employees, and the Janitorial Department cost is allocated on the basis of space. The following information is available: -Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is:

The reciprocal-services method cannot be combined with the dual-allocation approach.

When the step-down method is used, the service department whose costs are allocated first is often the department that:

Stormy Corporation has two service departments (S1 and S2) and two production departments (P1 and P2), and uses the step-down method of cost allocation. Management has determined that S1 provides more service to the firm than S2, and has decided that the number of employees is the best allocation base to use for S1. The following data are available: Which of the following statements is (are) true if S1 and S2 have respective operating costs of $280,000 and $350,000?

A joint product with minimal value relative to the other joint products is known as a by-product.

Suppose that one hog yields 250 pounds of ham, 200 pounds of chops, and 50 pounds of miscellaneous items. The sales value of ham is $1.80 per pound; chops, $2.50 per pound; and miscellaneous items, $1.00 per pound. The hog costs $670, and processing costs are $30. Required: A. Determine the proper allocation of joint costs to the three products by using the physical-units method. B. Repeat part "B" by using the relative-sales-value method.

Which of the following would be considered a service department for an airline?

Which of the following statements about joint-cost allocation is false?