Exam 17: Allocation of Support Activity Costs and Joint Costs

Use the following information to answer the following Questions The Dahle Manufacturing Company has two production departments (Assembly and Finishing) and two service departments (Human Resources and Janitorial). The projected usage of the two service departments is as follows: The budgeted costs in the service departments are: Human Resources, $90,000 and Janitorial, $50,000. -Using the direct method, the amount of Janitorial Department cost allocated to the Finishing Department is:

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 relative-sales-value method, the amount of joint cost assigned to product X would be:

Use this information to answer the following Questions Trek, 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)?

Hsu Company manufactures two products (A and B) from a joint process that cost $200,000 for the year just ended. 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. Further information follows. If the joint costs are allocated based on the physical-units method, the amount of joint cost assigned to product A would be:

Which of the following methods should be selected if a company terminates all processing at the split-off point and desires to use a cost-allocation approach that considers the "revenue-producing ability" of each product?

Which of the following methods would be of little use when allocating service department costs to production departments?

When allocating service department costs, companies should use:

Soprano Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow. If Soprano uses dual-cost accounting procedures and fixed administrative costs total $1,000,000, the amount of long-run cost to allocate to Department 1 would be:

Dual cost allocation works with either the direct method or the step-down method of allocation.

Midwest Alabama State College has two service departments, the Library and Computing Services that assist the School of Business and the School of Health. Budgeted costs of the Library and Computing Services are $800,000 and $1,800,000, respectively. Usage of the service departments' output during the year is anticipated to be: Required: A. Use the direct method to allocate the costs of the Library and Computing Services to the School of Business and the School of Health. B. Repeat requirement "A" using the step-down method. Midwest allocates the cost of Computing Services first.

Which of the following methods recognizes some (but not all) of the services that occur between service departments?

Use this information to answer the following Questions Corey Corporation manufactures joint products W and X. During a recent period, joint costs amounted to $300,000 in the production of 20,000 gallons of W and 60,000 gallons of X. Both products will be processed beyond the split-off point, giving rise to the following data: -The joint cost allocated to W under the net-realizable-value method would be:

The Covington Clinic has two service departments (Human Resources and Information Systems) and two "production" departments (In-patient Treatment and Out-patient Treatment). The service departments service the "production" departments as well as each other, and studies have shown that Information Systems provides the greater amount of service. Which of the following allocations would not occur if Covington uses the step-down method of cost allocation?

Consider the following statements about the direct method of service department cost allocation: I. Under the direct method, all service department costs are eventually allocated to production departments. II. The order in which service department costs are allocated to production departments is important. III. Once a service department's costs have been allocated, no costs are re-circulated back to that department. Which of the above statements is (are) correct?

Use this information to answer the following Questions Trek, 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 direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

Consider the following statements about the step-down method of service department cost allocation: I. Under the step-down method, all service department costs are eventually allocated to production departments. II. The order in which service department costs are allocated is important. III. After a service department's costs have been allocated to other departments, no costs are re-circulated back to that service department. Which of the above statements is (are) correct?

Allegiance Corporation has two service departments (S1 and S2) and two production departments (P1 and P2). S1 and S2 both use the number of employees as an allocation base. The following data are available: Required: A. Assuming use of the direct method: 1. Over how many employees would S1's budgeted cost be allocated? 2. How much of S2's cost would be allocated to P1? 3. How much of P1's cost would be allocated to S1? B. Assuming use of the step-down method: 1. How much of S1's cost would be allocated to S2? Allegiance allocates S1's costs prior to allocating those of S2. 2. How much of S2's total cost would be allocated to P2? 3. How much of S2's total cost would be allocated to S1?

The breakdown of costs by departments is much finer than a breakdown by activities in an ABC system.

The process of allocating fixed and variable costs separately is called:

Which of the following methods fully recognizes the fact that some service departments provide service to other service departments?