Exam 9: Allocating Service Department Costs and Responsibility Accounting

Burrito Blast manufactures two types of burritos-bean and beef. They share legal department services with other departments. What is the typical allocation base for the legal department costs?

Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000. The Wave Blaster department has 15 employees that make 20 requests of the payroll department a month. The Boogie Break department has 5 employees that make 20 requests of the payroll department a month. Which of the following is TRUE?

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000. The following data are available: -What amount of shipping service costs would be allocated to each division if Shoppers Paradise uses total number of requests as the allocation cost base?

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services. - If City Inspections allocates shared legal costs number of employees as the allocation base, how much of the legal costs will be allocated to Annual inspections department?

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of employees as the allocation base, how much of the payroll costs will be allocated to each department?

During July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. In reviewing the report and related data, the manager may conclude:

Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000. The departments allocate payroll costs based on number of employees. The Wave Blaster department has 15 employees and the Boogie Break department has 5 employees. What is the amount of payroll costs allocated to the Boogie Break department?

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $20,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, what will be the net income of each department after allocating shared payroll costs.

Stretchmore, Inc. has two product divisions: Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows: - If Stetchmore uses budgeted contribution margin as the allocation cost base, how much accounting costs would be allocated to the Rubber Band Division?

Burrito Blast manufactures two types of burritos-bean and beef. Which of the following is MOST likely to be a shared service department for Burrito Blast?

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $10,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows: Which is the best method to allocate shared copy costs?

July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. The performance report for July would show a net income variance of what amount?

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000. The following data are available: - If Shoppers Paradise uses operating income as the allocation cost base, what percentage would be used to allocate shared shipping costs to each division?

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, GraphicDesign, and Nursing. The college shares copy services with a total Monthly cost of $10,000. The college is considering allocating costs using either number of copies or Operating income as its allocation base. Data for the month of September, 2012 follows: - If Bright College uses number of copies as the allocation cost base, what percentage would be used to allocate shared copy costs to each division?

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services. - If City Inspections allocates shared legal costs using number of hours of use as the allocation base, how much of the legal costs will be allocated to the Roads department?

A service department is a decentralized, revenue generating department that provides services to many other departments within the company.

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000. The following data are available: - If Shoppers Paradise uses number of addresses as the allocation cost base, what amount of net income would be reported after allocating shared shipping costs to each division?

During July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. In reviewing the decrease in COGS, the manager concludes:

Which of the following is NOT likely to be a shared service department?

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, how much of the payroll costs will be allocated to each department?