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

Because the variable costs are directly and causally linked to usage, charging them as a function of the actual usage is appropriate.

Revenue allocation is required to determine the profitability of individual items within a bundled product.

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 1400 hours and by the Night Light Division was 700 hours. If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division?

The step-down method allocates support department costs to only operating departments in a sequential manner.

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

An advantage of the single-rate method is that it is the most accurate method of cost-allocation.

Which of the following departments would not be considered a service or support department?

The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 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 $184,000 and $276,000, 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 A if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)

Which of the following would be an explicit agreement of reimbursement on a contract?

Which of the following is an example of a bundled product?

Under the incremental method of allocating common costs ________.

In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because ________.

Complete reciprocated costs is the support department's own costs plus any interdepartmental cost allocations.

Tryst University offers only high-tech graduate-level programs. Tryst has two principal operating departments, Engineering and Social Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $450,000, while the Enrollment Services budget is $900,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department: Required: Use the direct method to allocate support costs to each of the two principal operating departments, Engineering and Social Sciences. Prepare a schedule showing the support costs allocated to each department.

To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using ________.

Hugo, owner of Automated Fabric, 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 Personnel Department? (Do not round any intermediary calculations.)

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 Reading Fun in the first package (Reading Fun & Math Fun)? (Do not round any intermediary calculations.)

Gotham University offers only high-tech graduate-level programs. Gotham has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $350,000, while the Enrollment Services budget is $950,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department: Required: a.Set up algebraic equations in linear equation form for each activity. b.Determine total costs for each department by solving the equations from part (a) using the reciprocal method. (Engineering= Eng; Computer Sciences = CS; Facility and Technical Maintenance = FTM; Enrollment Service = ES)

Which of the following statements is true about the step-down method?