Exam 9: Allocating Service Department Costs and Responsibility Accounting

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 percentage would be used to allocate shared shipping 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 Annual inspections department?

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: Which is the best method to allocate shared accounting costs?

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

Decentralization allows decision making to occur at many levels throughout the organization.

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations). Budget and actual data for each of the four tourist locations are as follows: -The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of customer service(reservation) costs allocated to the Niceville location, assuming customer service costs are allocated based on the number of calls at each location?

Which of the following is not a responsibility center?

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 number of reports as the allocation cost base, how much accounting costs would be allocated to the Rubber Band Division?

XYZ Company budgeted $4 million for customer service costs, but actually spent only $3 million. Which of the following statements indicates the best course of action for management to take?

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. Wave Blaster would receive less allocated shared facilities cost if the number of employees were used as the allocation method.

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 reports as the allocation base, how much of the payroll costs will be allocated to the Annual inspections department?

Bob-Co allocates all copying charges to the departments that use their services. This means Bob-Co's copying department is a shared service department.

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: Allocate the cost to each division using total number of copies as the allocation cost base.

You just received a new job assignment as head of the Widgets division. In your previous job, you were responsible for the Smidget widget's profit.

Burrito Blast manufactures two types of burritos-bean and beef. Which of the following is NOT likely to be a shared service department for Burrito Blast?

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations). Budget and actual data for each of the four tourist locations are as follows: -The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. Assume the call volume for Prattville increases to 22,000. The amount of customer service (reservation) costs are allocated to locations based on the number of calls at each location. Which of the following would be true regarding the allocation of customer service 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 Bungee Cord Division?

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 number of reports as the allocation cost base, how much accounting costs would be allocated to the Bungee Cord Division?

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 $15,000. 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 operating income as the allocation cost base, how much copy costs would be allocated to the Nursing Division?

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