Exam 15: Allocation of Support-Department Costs, Common Costs, and Revenues

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $200,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $142,500 and $171,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Production Support DepartmentsDepartments Using the step-down method, what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round intermediary calculations to three decimal places.)

Two or more support departments whose costs are being allocated can also provide support to each other and as well as to operating departments.

Special cost-allocation problems arise when ________.

The best method to determining weights for the stand-alone revenue-allocation method is ________.

Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services.

When using the dual-rate method, the fixed cost allocation is based on ________.

Craylon Corp sells two products X and Y. X sells for $200 and Y sells for $160. Both X and Y sell for $310 as a bundle. What is the revenue allocated to product Y, if product X is termed as the primary product in the bundle?

The issue of "allowable costs" is applicable in government cost-plus contracts.

An alternative way to implement the reciprocal method is to formula and use linear equations.

The dual-rate cost-allocation method provides better information for decision making than the single-rate method as it differentiates between fixed and variable costs and its allocation.

Harbor Corp currently leases a corporate suite in an office building for a cost of $300,000 a year. Only 81% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 19% of the suite and increase the overall costs of maintaining the space by $28,139. If the stand-alone method were used, what amount of cost would be allocated to the start-up business? (Round the final answer to the nearest dollar.)

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $360,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $188,000 and $282,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Production Support DepartmentsDepartments Using the direct method, what amount of Maintenance Department costs will be allocated to Department B? (Do not round any intermediary calculations.)

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours. If a single-rate cost-allocation method is used, what is the allocation rate per hour used? (Round the final answer to the nearest dollar.)

The direct allocation method provides key information for outsourcing decisions regarding support services.

Give examples of bundled products for each of the following industries: a.Resort hotel b.Bank c.Restaurant d.Computer store e.Super markets f.Personal care products manufacturer

Which of the following describes who the direct allocation method allocates support-department costs?

Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year: Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 hours. If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division?

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $208,000 and $312,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Production Support DepartmentsDepartments Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)