Exam 9: Allocating Service Department Costs and Responsibility Accounting

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. Which is the best method to allocate traceable accounting costs?

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 amount of net income would be reported after allocating shared shipping costs to each division?

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 number of reports requested by the Niceville location was 50 and the number of reports requested by Danville was 60. 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?