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 $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $112,500 and $135,000, 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 Warehouse Department costs will be allocated to Department Books? (Do not round any intermediary calculations.)

The costs of unused capacity are highlighted when ________.

When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.

Harbor Corp currently leases a corporate suite in an office building for a cost of $360,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,484. If the incremental method were used, what amount of cost would be allocated to the start-up business?

Under the incremental method, the first incremental user receives the largest allocation of the common costs.

Which of the following is an advantage of using practical capacity to allocate costs?

Managers of supplier departments ________.

Which of the following best describes the stand-alone revenue-allocation method?

When budgeted fixed costs are allocated based on actual usage, user departments will not know their fixed-cost allocations until the end of the budget period.

The cost-allocation method that allocates each support-department's costs to operating departments only is the direct method.

The dual-rate cost-allocation method classifies costs in each cost pool into a ________.

The direct method is conceptually the most precise method because it considers the mutual services provided among all support departments.

Revenue allocation is used when ________.

When actual cost-allocations rates are used, which of the following would be true?

Which of the following describes reciprocal support?

Which of the following would be considered the biggest advantage of using practical capacity to allocate costs?

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 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.

The method that allocates costs in each cost pool using the same rate per unit is known as the ________.

Electro Corp sells a refrigerator and a freezer as a single package for $1150. Other data are in the chart below. Using the stand-alone method with manufacturing cost per unit as the weight for revenue allocation, what amount will be allocated to the refrigerator? (Do not round any intermediary calculations.)

The stand-alone cost allocation method ranks the individual users of a cost object in order of users most responsible for a common cost and then uses these rankings to allocate the costs among the users.