Exam 15: Allocation of Support Activity Costs and Joint Costs

Which of the following methods ignores the fact that some service departments provide service to other service departments?

Hilton Hamlet Corp. has an Advertising Department and a Human Resources Department that provide service to three store locations. The Human Resources Department cost is allocated on the basis of employees, and the Advertising Department cost is allocated on the basis of space. The following information is available: Human Resources Advertising Store \#1 Store \#2 Store \#3 Budgeted Cost \ 30,000 \ 15,000 Space in Square 2,000 500 10,000 33,000 40,000 feet Number of 10 5 20 50 35 Employees Using the step-down method and assuming that Human Resources cost is allocated first, the amount of Human Resources cost allocated to Store # 3 is:

Hillary Corporation has two service departments (Human Resources and Accounting & Finance) and two production departments (Machining and Assembly). The company allocates Human Resources cost on the basis of square footage and believes that Human Resources provides more service than Accounting & Finance. The square footage occupied by each department follows. Human Resources 12,000 Accounting and Finance 15,000 Machining 40,000 Assembly 26,000 Assuming use of the direct method, over how many square feet would the Accounting and Finance cost be allocated?

Home Life Insurance Company has two service departments (actuarial and premium rating) and two production departments (advertising and sales). The distribution of each service department's efforts (in percentages) to the other departments is as follows: Premium Advertising Rating Actuarial - 80\% 10\% 10\% Premium 20\% - 20\% 60\% The direct operating costs of the departments are: Actuarial \ 80,000 Premium Rating 15,000 Advertising 60,000 Sales 40,000 Required: A. Use the reciprocal services method to formulate the equations to be used for allocating the total cost to advertising and sales and calculate the reciprocated cost of each service department. B. Use the reciprocal cost method and calculate the total cost allocated to each operating department.

The process of allocating fixed and variable costs separately is called:

Trifecta Inc. allocates administrative costs on the basis of square footage. Short-run monthly usage and anticipated long-run monthly usage of square footage for Operating Departments 1 and 2 follow. Dept. 1 Dept. 2 Total Short-run usage 30,000 70,000 100,000 Long-run usage 50,000 50,000 100,000 If Trifecta uses dual-cost accounting procedures and variable administrative costs total $320,000, the amount of variable administrative cost to allocate to Department 1 would be:

Which of the following choices correctly denotes the data needed to allocate joint costs under the relative-sales-value method? Sales Value of Product Separable Sales Value of Product After Processing 1 Yes Yes No 2 Yes Yes Yes 3 Yes No No 4 No Yes Yes 5 No No Yes