Question 1

The mathematical technique that underlies the reciprocal cost allocation method is:

Accepted Answer

A) Regression analysis. 
B) Simultaneous equations. 
C) Analysis of variances. 
D) Complex algebraic functions. 
E) Multiple correlation. 
A) Regression analysis. 
B) Simultaneous equations. 
C) Analysis of variances. 
D) Complex algebraic functions. 
E) Multiple correlation. B

Question 2

Hatchett Inc.produces joint products L,M,and N from a joint process.Information concerning a batch produced in May at a joint cost of $75,000 was as follows:  
The amount of joint costs allocated to product M using the physical measure method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $23,438. 
B) $33,434. 
C) $40,313. 
D) $27,109. 
E) $11,250. 
A) $23,438. 
B) $33,434. 
C) $40,313. 
D) $27,109. 
E) $11,250. A

Question 3

The following data on overhead apply to the Acme Manufacturing Company that manufactures frames for large trucks in three production departments (J-122,J123,and J-125).There are two service departments,the Human Resources Department and the Facilities Department.

Accepted Answer

* Allocated on the basis of hours of usage in the HR department.* * Allocated on the basis of floor space.
Required:Using hours as the application base for the Human Resources Department and square feet of floor space for the Facilities Department,apply overhead from these service departments to the production departments,using the following two methods.(1)Direct method.(2)Step method (assume the human resources department is allocated first).Calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar.
Please see Feedback for answers.
Explanation: Feedback: 1.Direct Method   2.Step Method

Question 4

Net Realizable Value (NRV)of a product is:

Accepted Answer

A) Split-off cost - profit margin - additional processing and selling cost. 
B) Profit at split-off + additional processing and selling cost. 
C) Ultimate sales value - additional processing and selling cost. 
D) Ultimate sales value + additional processing and selling cost. 
E) Cost allocation plus separable cost. 
A) Split-off cost - profit margin - additional processing and selling cost. 
B) Profit at split-off + additional processing and selling cost. 
C) Ultimate sales value - additional processing and selling cost. 
D) Ultimate sales value + additional processing and selling cost. 
E) Cost allocation plus separable cost.

Question 5

In making decisions about whether to sell or further process joint products,allocation of common or joint costs is:

Accepted Answer

A) Essential. 
B) Useful. 
C) 
C) Irrelevant. 
D) Is useful depending on the method chosen. 
E) Is the only way to get the true total product cost. 
A) Essential. 
B) Useful. 
C) 
C) Irrelevant. 
D) Is useful depending on the method chosen. 
E) Is the only way to get the true total product cost.

Question 6

Which of the following methods considers all reciprocal flows between service departments through simultaneous equations?

Accepted Answer

A) Dual method. 
B) Step method. 
C) Reciprocal method. 
D) Direct method. 
E) The net realizable value method. 
A) Dual method. 
B) Step method. 
C) Reciprocal method. 
D) Direct method. 
E) The net realizable value method.

Question 7

A concept which is commonly employed with allocation bases related to size is:

Accepted Answer

A) Cost shifting. 
B) Benefit received. 
C) Equity share. 
D) Cause and effect relationship. 
E) Ability to bear. 
A) Cost shifting. 
B) Benefit received. 
C) Equity share. 
D) Cause and effect relationship. 
E) Ability to bear.

Question 8

Hatchett Inc.produces joint products L,M,and N from a joint process.Information concerning a batch produced in May at a joint cost of $75,000 was as follows:  
The amount of joint costs allocated to product N using the net realizable value method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $3,614. 
B) $11,250. 
C) $40,312. 
D) $33,434. 
E) $37,952. 
A) $3,614. 
B) $11,250. 
C) $40,312. 
D) $33,434. 
E) $37,952.

Question 9

Hatchett Inc.produces joint products L,M,and N from a joint process.Information concerning a batch produced in May at a joint cost of $75,000 was as follows:  
The amount of joint costs allocated to product L using the net realizable value method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $3,614. 
B) $11,250. 
C) $40,312. 
D) $33,434. 
E) $37,952. 
A) $3,614. 
B) $11,250. 
C) $40,312. 
D) $33,434. 
E) $37,952.

Question 10

An overhead cost that can be traced directly to either a service or production department:

Accepted Answer

A) Is called a "flow through" cost. 
B) Requires less allocation effort. 
C) Is charged directly to that department. 
D) Must be variable. 
E) Must be fixed. 
A) Is called a "flow through" cost. 
B) Requires less allocation effort. 
C) Is charged directly to that department. 
D) Must be variable. 
E) Must be fixed.

Question 11

Relative sales value at split-off is used to allocate: Cost Beyond

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 12

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows.  
The amount of joint costs allocated to product DBB-1 using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $939,130. 
B) $216,870. 
C) $447,205. 
D) $420,335. 
E) $2,213,665. 
A) $939,130. 
B) $216,870. 
C) $447,205. 
D) $420,335. 
E) $2,213,665.

Question 13

Which of the following is not one of the objectives of cost allocation?

Accepted Answer

A) Motivate managers to exert a high-level of effort. 
B) Provide useful departmental and product costs. 
C) Identify production constraints. 
D) Provide the right incentive for managers to make decisions. 
E) Provide an appropriate basis for performance evaluation. 
A) Motivate managers to exert a high-level of effort. 
B) Provide useful departmental and product costs. 
C) Identify production constraints. 
D) Provide the right incentive for managers to make decisions. 
E) Provide an appropriate basis for performance evaluation.

Question 14

Russell Co.produces three products - U,V,and W - from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Last year all three products were processed beyond split-off.Joint production costs for the year were $70,000.Sales values and costs needed to evaluate Russell's production policy follow.  
The amount of joint costs allocated to product W using the physical measure method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $19,266. 
B) $32,110. 
C) $23,333. 
D) $14,000. 
E) $32,667. 
A) $19,266. 
B) $32,110. 
C) $23,333. 
D) $14,000. 
E) $32,667.

Question 15

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows.  
The amount of joint costs allocated to product DBB-2 using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $939,130. 
B) $216,870. 
C) $447,205. 
D) $420,335. 
E) $2,213,665. 
A) $939,130. 
B) $216,870. 
C) $447,205. 
D) $420,335. 
E) $2,213,665.

Question 16

An alternative concept of fairness in cost allocation,absent the cause-and-effect basis,include(s):

Accepted Answer

A) Ability-to-bear. 
B) Efficiency. 
C) Different costs for different purposes. 
D) Consistency. 
A) Ability-to-bear. 
B) Efficiency. 
C) Different costs for different purposes. 
D) Consistency.

Question 17

Russell Co.produces three products - U,V,and W - from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Last year all three products were processed beyond split-off.Joint production costs for the year were $70,000.Sales values and costs needed to evaluate Russell's production policy follow.  
The amount of joint costs allocated to product V using the net realizable value method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $24,159. 
B) $28,496. 
C) $18,624. 
D) $17,345. 
E) $32,110. 
A) $24,159. 
B) $28,496. 
C) $18,624. 
D) $17,345. 
E) $32,110.

Question 18

If a budgeted activity base is used as the base in cost allocation,each department's cost allocation will be predictable,and not influenced by the:

Accepted Answer

A) Actual total cost. 
B) Change in activity. 
C) Variations from budget. 
D) Errors in calculations. 
E) Actual usage in other departments. 
A) Actual total cost. 
B) Change in activity. 
C) Variations from budget. 
D) Errors in calculations. 
E) Actual usage in other departments.

Question 19

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between:

Accepted Answer

A) The service departments. 
B) The producing departments. 
C) Multiple products. 
D) Competing departments. 
E) Similar,but separate,products. 
A) The service departments. 
B) The producing departments. 
C) Multiple products. 
D) Competing departments. 
E) Similar,but separate,products.

Question 20

The Insurance Plus Company has two service departments - actuarial and premium rating,and two production departments - marketing and sales.The distribution of each service department's efforts to the other departments is shown below:  
The direct operating costs of the departments (including both variable and fixed costs)were as follows: Actuarial $50,000.Premium Rating $40,000.Marketing $60,000.Sales $70,000.The total cost accumulated in the sales department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $14,588. 
B) $84,588. 
C) $107,529. 
D) $160,000. 
E) $177,529. 
A) $14,588. 
B) $84,588. 
C) $107,529. 
D) $160,000. 
E) $177,529.

The mathematical technique that underlies the reciprocal cost allocation method is:

The following data on overhead apply to the Acme Manufacturing Company that manufactures frames for large trucks in three production departments (J-122,J123,and J-125).There are two service departments,the Human Resources Department and the Facilities Department.

Net Realizable Value (NRV)of a product is:

In making decisions about whether to sell or further process joint products,allocation of common or joint costs is:

Which of the following methods considers all reciprocal flows between service departments through simultaneous equations?

A concept which is commonly employed with allocation bases related to size is:

An overhead cost that can be traced directly to either a service or production department:

Relative sales value at split-off is used to allocate: Cost Beyond

Which of the following is not one of the objectives of cost allocation?

An alternative concept of fairness in cost allocation,absent the cause-and-effect basis,include(s):

If a budgeted activity base is used as the base in cost allocation,each department's cost allocation will be predictable,and not influenced by the:

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between:

Cost Management and Strategy

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Estimation

Profit Planning: Cost-Volume-Profit Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing,Theory of Constraints,and Strategic Pricing

Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource- Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers

Management Compensation, Business Analysis, and Business Valuation

Filters

Exam 7: Cost Allocation: Departments, Joint Products, and By-Products

The mathematical technique that underlies the reciprocal cost allocation method is:

The following data on overhead apply to the Acme Manufacturing Company that manufactures frames for large trucks in three production departments (J-122,J123,and J-125).There are two service departments,the Human Resources Department and the Facilities Department.

Net Realizable Value (NRV)of a product is:

In making decisions about whether to sell or further process joint products,allocation of common or joint costs is:

Which of the following methods considers all reciprocal flows between service departments through simultaneous equations?

A concept which is commonly employed with allocation bases related to size is:

An overhead cost that can be traced directly to either a service or production department:

Relative sales value at split-off is used to allocate: Cost Beyond

Which of the following is not one of the objectives of cost allocation?

An alternative concept of fairness in cost allocation,absent the cause-and-effect basis,include(s):

If a budgeted activity base is used as the base in cost allocation,each department's cost allocation will be predictable,and not influenced by the:

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between:

Cost Management and Strategy

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Estimation

Profit Planning: Cost-Volume-Profit Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing,Theory of Constraints,and Strategic Pricing

Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource- Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers

Management Compensation, Business Analysis, and Business Valuation

Filters