A company incurred $120,000 of common fixed costs and $180,000 of common variable costs.These costs are to be allocated to Departments XX and YY.Data on capacity provided and capacity used are as follows: \[\begin{array} { c c c } & \text { Capacity Pravided } & \text { Capacity Used } \\ \text { Department }& \text { in Hours } & \text { in Hours } \\ \text { XX } & 500 & 400\\ \text { YY }&300&400 \end{array}\] Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used.What are the fixed and variable costs allocated to Department XX? \[\text { Fixed \quad\quad\quad Variable }\]

A) $60,000 $90,000 B) $60,000 $112,500 C) $75,000 $90,000 D) $75,000 $112,500 A) $60,000 $90,000 B) $60,000 $112,500 C) $75,000 $90,000 D) $75,000 $112,500

Bond Corporation,which manufactures products W,X,Y,and Z through a joint process costing $18,000,has the following data for the current year: $\begin{array}{rrr} &&\text { Total Sales Value }\\ \text { Product } & \text { Units Produced } &\text { at Split-Off }\\ W & 10,000 & \$ 5,000 \\ X & 6,000 & 2,500 \\ Y & 16,000 & 3,000 \\ Z & 8,000 & 4.500 \end{array}$ What is the amount of joint costs assigned to product W using the physical units method?

A) $4,500 B) $6,000 C) $12,000 D) $13,500 A) $4,500 B) $6,000 C) $12,000 D) $13,500

Suppose that a sawmill processes logs into four grades of lumber totalling 500,000 board metres as follows at a joint cost of $300,000: $\begin{array}{lcc} \text { Grade } & \text { Board Metres } & \text { Final Sales Value }\\ \text { First and second } & 75,000 & \$ 56,250 \\ \text { No. } 1 \quad\text { common } & 200,000 & 180,000 \\ \text { No. } 2 \quad\text { common } & 100,000 & 105,000 \\ \text { No. } 3 \quad\text { common } & 125,000 & 127.500 \end{array}$ What amount of joint costs will be allocated to No.1 common using the final sales value method?

A) $36,000 B) $115,200 C) $120,000 D) $300,000 A) $36,000 B) $115,200 C) $120,000 D) $300,000

Staff Company allocates common Building Department costs to producing departments (P1 and P2)based on space occupied,and it allocates common Personnel Department costs based on the number of employees.Space occupancy and employee data are as follows: $\begin{array}{lcccc} &\text { Building } & \text { Personnel } & \text { Dept.P1 }&\text { Dept. P2 }\\ \text { Space occupied } & 2,000 \mathrm{~m} & 10,000 \mathrm{~m} & 120,000 \mathrm{~m} & 70,000 \mathrm{~m} \\ \text { Employees } & 6 & 10 & 80 & 50 \end{array}$ If Staff Company uses the direct allocation method,what is the ratio representing the portion of building costs allocated to Department P1?

A) 2,000/120,000 B) 120,000/190,000 C) 120,000/202,000 D) 190,000/202,000 A) 2,000/120,000 B) 120,000/190,000 C) 120,000/202,000 D) 190,000/202,000

Exam 7: Allocating Costs of Support Departments and Joint Products

Wilson, Inc., operates a copy business at two different locations. Wilson, Inc., has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy centre on the basis of total copies made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (copies made) are as follows: Copy Centre 1 Copy Centre 2 Normal activity (copies) 1,200,000 800,000 Actual activity (copies) 1,000,000 880,000 -Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 2?

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A

Hanson Printing operates a copy business at two different locations.Hanson Printing has one support department that is responsible for cleaning,service,and maintenance of its copying equipment.The costs of the support department are allocated to each copy centre on the basis of total copies made. During the first month,the costs of the support department were expected to be $100,000.Of this amount,$30,000 is considered a fixed cost.During the month,the support department incurred actual variable costs of $64,000 and actual fixed costs of $36,000. Normal and actual activity (copies made)are as follows: Copy Centre 1 Copy Centre 2 Normal activity (copies) 3,000,000 2,000,000 Actual activity (capies) 2,500,000 2,200,000 a.For purposes of performance evaluation,calculate the fixed costs allocated to Copy Centre 1. b.For purposes of performance evaluation,calculate the fixed costs allocated to Copy Centre 2. c.Calculate the support department costs not allocated to the two copy centres.

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a.$30,000 * (3,000,000/5,000,000)= $18,000
b.$30,000 * (2,000,000/5,000,000)= $12,000
c.
Fixed overhead not allocated to copy centres:
$\begin{array}{l}\quad(\$ 36,000-\$ 30,000) & \$ 6,000\\\text { Variable costs not allocated: } \\\quad \$ 70,000 / 3,000,000+2,000,000=\$ 0.04 \\\quad[\$ 64,000-(\$ 0.014 \times 4,700,000)]&(1,800)\\&\$ 4,200\end{array}$

Gray Enterprises has two support departments (S1 and S2)and two producing departments (A and B). The distribution of services by the support departments is as follows: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { ServicesProvided to }$ ServicesProvided from S 1 - 8\% 74\% 18\% S 2 21\% - 47\% 32\% Total department costs for the support and producing departments are as follows: 1 558,000 S2 124,000 A 712,000 B 568,000 Find the amount of total costs for A and B using the reciprocal method.

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$\begin{array} { l } \mathrm { S } 1 = \$ 58,000 + 0.21 \mathrm {~S} 2 \\\mathrm {~S} 1 = \$ 58,000 + 0.21 ( \$ 124,000 + 0.08 \mathrm {~S} 1 ) \\0.9832 \mathrm {~S} 1 = \$ 84,040 \\\mathrm {~S} 1 = \$ 85,476 \\\mathrm {~S} 2 = \$ 124,000 + 0.08 \mathrm {~S} 1 \\\mathrm {~S} 2 = \$ 124,000 + 0.08 ( \$ 85,476 ) \\\mathrm { S } 2 = \$ 130,838\end{array}$
$\begin{array}{lcrrr}&\underline{\text { S1 }} &\underline{\text { S2 }}&\underline{A} &\underline{B}\\\text { Direct costs } & \$ 58,000 & \$ 124,000 & \$ 712,000 & \$ 568,000 \\\text { Allocate S1 } & (85,476) & 6,838 & 63,252 & 15,386 \\\text { Allocate S2 } & \underline{27,476} & \underline{(130,838)} & \underline{61,494} & \underline{41,868} \\& \underline{\$ 0} & \underline{\$ 0} & \underline{\$ 836,746} & \underline{\$ 625,254}\end{array}$