Question 1

What is an operating department and how is it different from a support department? Give examples of each.

Accepted Answer

An operating department, also called a p

Question 2

The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations 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 Marketing Department was 120,000 copies and by the Operations Department was 380,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department?

Accepted Answer

A)  $65,100 
B)  $68,600 
C)  $64,140 
D)  $67,640 
A)  $65,100 
B)  $68,600 
C)  $64,140 
D)  $67,640

Question 3

Buzz's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:
 
Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Math Fun in the package that contains all three products? (Do not round any intermediary calculations.)

Accepted Answer

A)  $16.51 
B)  $31.00 
C)  $23.33 
D)  $29.39 
A)  $16.51 
B)  $31.00 
C)  $23.33 
D)  $29.39

Question 4

Emrald Corp currently uses a manufacturing facility costing $520,000 per year; 85% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 15% of the facility and increase the overall costs of maintaining the space by 12%. If the stand-alone method were used, what amount of cost would be allocated to the start-up business?

Accepted Answer

A)  $75,660 
B)  $78,000 
C)  $66,300 
D)  $87,360 
A)  $75,660 
B)  $78,000 
C)  $66,300 
D)  $87,360

Question 5

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 dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Large Plane Department?

Accepted Answer

A)  $9,846,000 
B)  $9,012,500 
C)  $7,658,000 
D)  $11,587,500 
A)  $9,846,000 
B)  $9,012,500 
C)  $7,658,000 
D)  $11,587,500

Question 6

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the SEC.

Accepted Answer

A) True 
 B)False

Question 7

Emrald Corp currently uses a manufacturing facility costing $560,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 11%. If the incremental method were used, what amount of cost would be allocated to the start-up business?

Accepted Answer

A)  $50,400 
B)  $61,600 
C)  $62,160 
D)  $56,560 
A)  $50,400 
B)  $61,600 
C)  $62,160 
D)  $56,560

Question 8

When using the direct allocation method, a cost accountant would ________.

Accepted Answer

A)  not allocate support department costs to other support departments 
B)  use information about reciprocal services provided among support departments and therefore could generate inaccurate estimates of the cost of operating departments 
C)  allocate complete reciprocated costs 
D)  allocate support department costs to other support departments 
A)  not allocate support department costs to other support departments 
B)  use information about reciprocal services provided among support departments and therefore could generate inaccurate estimates of the cost of operating departments 
C)  allocate complete reciprocated costs 
D)  allocate support department costs to other support departments

Question 9

Jonathan has managed a downtown store in a major metropolitan city for several years. The firm has ten stores in varying locations. In the past, senior management noticed Jonathan's work and he has received very good annual evaluations for his management of the store.
This year his store has generated steady growth in sales, but earnings have been deteriorating. After examining the monthly performance report generated by the company budgeting department, he noticed that increasing fixed costs is causing the decrease in earnings.
Administrative corporate costs, primarily fixed costs, are allocated to individual stores each month based on actual sales for that month. Two of these stores are currently growing at a rapid pace, while four other stores are having operating difficulties.
Required:
From the information presented, what do you think is the cause of Jonathan's reported decrease in earnings? How can this be corrected?

Accepted Answer

The variations in reporting are probably

Question 10

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 $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $137,500 and $165,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments
 
Using the direct method, what amount of Data Center Department costs will be allocated to Department Music? (Do not round any intermediary calculations.)

Accepted Answer

A)  $180,000 
B)  $83,505 
C)  $96,495 
D)  $75,349 
A)  $180,000 
B)  $83,505 
C)  $96,495 
D)  $75,349

Question 11

Which of the following is an example of a revenue object?

Accepted Answer

A)  suppliers 
B)  products 
C)  labor 
D)  duration to complete a given task 
A)  suppliers 
B)  products 
C)  labor 
D)  duration to complete a given task

Question 12

The price of a bundled product is typically more than the sum of the prices of the individual products sold separately.

Accepted Answer

A) True 
 B)False

Question 13

The stand-alone method uses the product in the bundle with the most sale and then uses this ranking to allocate bundled revenues to individual products.

Accepted Answer

A) True 
 B)False

Question 14

Electro Corp sells a refrigerator and a freezer as a single package for $1120. Other data are in the chart below.
 
Using the stand-alone method with stand-alone product revenues as the weight for revenue allocation, what amount will be allocated to the refrigerator? (Do not round any intermediary calculations.)

Accepted Answer

A)  $503.03 
B)  $647.58 
C)  $472.42 
D)  $560.00 
A)  $503.03 
B)  $647.58 
C)  $472.42 
D)  $560.00

Question 15

Which of the following would be the case under the stand-alone method of allocating common costs?

Accepted Answer

A)  the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those users 
B)  disputes can arise over who is the primary user 
C)  each party bears a proportionate share of the total costs in relation to their individual stand-alone costs 
D)  the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users 
A)  the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those users 
B)  disputes can arise over who is the primary user 
C)  each party bears a proportionate share of the total costs in relation to their individual stand-alone costs 
D)  the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users

Question 16

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:
 
What is the complete reciprocated cost of the Plant Maintenance Department? (Do not round any intermediary calculations.)

Accepted Answer

A)  $411,143 
B)  $400,693 
C)  $440,000 
D)  $404,957 
A)  $411,143 
B)  $400,693 
C)  $440,000 
D)  $404,957

Question 17

Contract disputes regarding cost allocation can be reduced by defining which of the following?

Accepted Answer

A)  the material items allowed for production 
B)  the terms used, such as what constitutes direct labor 
C)  permissible tax deductions 
D)  minimum profit level the company should earn 
A)  the material items allowed for production 
B)  the terms used, such as what constitutes direct labor 
C)  permissible tax deductions 
D)  minimum profit level the company should earn

Question 18

Craylon Corp has two service departments, S1 and S2, and two production departments, P1 and P2.
The data for April were as follows:
   
Required:
a.Set up algebraic equations in linear form for each activity.
b.Determine total costs for each department by solving the equations from part (a) using the reciprocal method.

Accepted Answer

a.S1 = $100,000 + 0.10 (S2)
S2 = $80,000

Question 19

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle.

Accepted Answer

A)  stand-alone revenue -allocation based on unit costs 
B)  stand-alone revenue-allocation based on selling prices 
C)  stand-alone revenue-allocation based on physical units 
D)  stand-alone revenue-allocation based on unit costs 
A)  stand-alone revenue -allocation based on unit costs 
B)  stand-alone revenue-allocation based on selling prices 
C)  stand-alone revenue-allocation based on physical units 
D)  stand-alone revenue-allocation based on unit costs

Question 20

Buzz's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:
 
Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis. (Do not round any intermediary calculations.)

Accepted Answer

A)  $20.07 
B)  $30.93 
C)  $27.00 
D)  $24.00 
A)  $20.07 
B)  $30.93 
C)  $27.00 
D)  $24.00

What is an operating department and how is it different from a support department? Give examples of each.

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the SEC.

When using the direct allocation method, a cost accountant would ________.

Which of the following is an example of a revenue object?

The price of a bundled product is typically more than the sum of the prices of the individual products sold separately.

The stand-alone method uses the product in the bundle with the most sale and then uses this ranking to allocate bundled revenues to individual products.

Which of the following would be the case under the stand-alone method of allocating common costs?

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: What is the complete reciprocated cost of the Plant Maintenance Department? (Do not round any intermediary calculations.)

Contract disputes regarding cost allocation can be reduced by defining which of the following?

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

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

What is an operating department and how is it different from a support department? Give examples of each.

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the SEC.

When using the direct allocation method, a cost accountant would ________.

Which of the following is an example of a revenue object?

The price of a bundled product is typically more than the sum of the prices of the individual products sold separately.

The stand-alone method uses the product in the bundle with the most sale and then uses this ranking to allocate bundled revenues to individual products.

Which of the following would be the case under the stand-alone method of allocating common costs?

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: What is the complete reciprocated cost of the Plant Maintenance Department? (Do not round any intermediary calculations.)

Contract disputes regarding cost allocation can be reduced by defining which of the following?

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters