Exam 7: Allocating Costs of Support Departments and Joint Products

Savings Bank has three revenue-generating departments: Chequing accounts, Savings Accounts, and Loans. The bank also has three service areas: Administration, Personnel, and Accounting. The direct costs per month and the interdepartmental service structure are shown below: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Percentage of Service Used by }$ Dept. Costs Admin. Pers. Acctg. Cheq. Sav. Loans Administration \ 40,000 - 10 10 40 20 20 Personnel 23,000 10 - 10 20 40 20 Accounting 30,000 10 10 - 20 20 40 Chequing 41,000 Savings 25,000 Loans 16,000 -Refer to the figure.Savings Bank uses the sequential (step)method and the service departments are allocated in the following order: administration,personnel,and accounting.How much cost would be allocated to the loan area from the personnel department using the sequential/step method (rounded to two decimal places)?

Wilson and Lewis,a large law firm,utilizes an internal centralized printing centre to serve its three departments: Individuals,Corporate,Trust.The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page.Total estimated print pages are estimated to be 330,000 pages.Individuals are estimated to use 130,000; Corporate will use 165,000 and 35,000 from the trust area. -Refer to the figure.Assuming a single charging rate is used,what would be the charge per page (rounded to the nearest cent)?

What is the term for products with substantial value that are produced simultaneously by the same process up to a split-off point?

If a support department's costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000,what should be the total amount of the support department's costs allocated to other departments?

Which of the following is one of the major objective(s)of allocations?

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?

Which of the following is not a major objective of allocation as identified by the IMA?

Alpha Company’s travel department had the following budgeted costs for the coming year: Varnable costs \ 34 per trip Fixed costs \ 143,360 The budgeted usage is given below: Yearly Trips Monthly Peak Trip West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given helow West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips -Refer to the figure.Using a single charging rate,how much will be charged to the West Sales Territory?

What is the most likely action to be taken by a company when a support department is less cost effective as an outside source?

Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?

Rust Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. -Refer to the figure.What is S2's cost equation?

Plants Company has two support departments (S1 and S2)and two producing departments (P1 and P2).Department S1 costs are allocated on the basis of number of employees,and Department S2 costs are allocated on the basis of space occupied expressed in square metres. Data on direct department costs,number of employees,and space occupied are as follows: S 1 S 2 P 1 P 2 Direct dept. costs \ 7,500 \ 11,000 \ 27,500 \ 30,000 Number of employees 10 5 20 25 Space occupied (sq. metres.) 1,000 500 1,500 2,500 When Plants uses the sequential method,the support department allocated first is the one with the highest percentage of interdepartmental service.The choice of the department allocated first is determined by the comparison of which of the following sets of ratios for S1 and S2,respectively?

Which of the following would be the most appropriate base for allocating the costs of the housekeeping department?

Which of the following is the cost of crude oil used in producing gasoline products an example of?

Xi Print operates a copy business at two different locations. Xi Print 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 $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Centre 1 Copy Centre 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 -Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 1?

Oaks Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 Number of employees 10 20 90 90 Direst lahour houre 50 50 250 250 -Refer to the figure.What is the combined total department costs for the producing departments after allocation of the support departments?

A company incurred $40,000 of common fixed costs and $60,000 of common variable costs.These costs are to be allocated to Departments A and B.Data on capacity provided and capacity used are as follows: Capacity Provided Capacity Used Department in Hours in Hours A 400 320 B 240 320 Assume that common fixed costs are to be allocated to Departments A and B on the basis of capacity provided and that common variable costs are to be allocated to Departments A and B on the basis of capacity used.What are the fixed and variable costs allocated to Department A? Fixed Variable A) \ 20,000 \ 30,000 B) \ 20,000 \ 37,500 C) \ 25,000 \ 30,000 D) \ 25,000 \ 37,500

Consider the following statement: Overall sales revenue minus overall costs (joint plus further processing costs)is calculated to yield gross profit and the gross profit percentage.Each product is then assigned the same cost of goods sold percentage.Which joint cost allocation method does the statement describe?

Yo Department Store incurred $4,000 of indirect advertising costs for its operations. The following data has been collected for the current year for its three departments: Shoes Cosmetics Crafts Sales \ 160,000 \ 120,000 \ 120,000 Direct advertising costs \ 7,000 \ 10,000 \ 3,000 Newspaper ad space 62\% 20\% 18\% -Refer to the figure.How much of the indirect advertising costs will be allocated to the Cosmetics Department if direct advertising costs is the activity driver?

Newton Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $120,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $18,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows: Maint. Person. Dept. Dept. Dept. Dept. P1 p2 Standard service hours used 400 200 1,200 600 Number of emplayes 20 40 180 180 Direct labour hours 200 200 1,000 1,000 -Refer to the figure.What are the total overhead costs associated with P1 after allocating the Maintenance and Personnel Departments using the direct method?