Exam 7: Allocating Costs of Support Departments and Joint Products

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: Building Persomel Dept. P1 Dept. P2 Space occupied 2,000 10,000 120,000 70,000 Employees 6 10 80 50 If Staff Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first,what is the ratio representing the portion of Personnel Department costs allocated to Department P2?

Lopez Manufacturing prices its products at full cost plus 40 percent.The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square metres,and Support Department B's costs are allocated based on number of employees.Department C uses direct labour hours to assign overhead costs to products,while Department D uses machine hours. One of the products the company produces requires 4 direct labour hours per unit in Department C and no time in Department D.Direct materials for the product cost $45 per unit,and direct labour is $20 per unit. If the direct method of allocation is used and the company follows its usual pricing policy,what would be the selling price of the product?

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: S1 S2 P1 P2 Direct dept. costs \ 7,500 \ 11,000 \ 27,500 \ 30,000 Number of employees 10 5 20 25 Space occupied (.) 1,000 500 1,500 2,500 If Plants used the reciprocal method,what is the algebraic equation expressing the total costs allocated from S1?

Deli Products produces two products,X and Y,in a single process.In the current year,the joint costs of this process were $25,000.In addition,4,000 units of X and 6,000 units of Y were produced.Separable processing costs beyond the split-off point were: X-$10,000; Y-$20,000.X sells for $10.00 per unit; Y sells for $7.50 per unit. - What is the gross profit of product Y assuming the physical units method is used?

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,determine the rate per trip.

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 both fixed and variable costs are allocated 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

Which of the following industries would most likely have joint costs in production?

Crow Company applies factory overhead in its two producing departments using a predetermined rate based on budgeted machine hours in the Mixing Department and based on budgeted labour hours in the Packaging Department.Variable cafeteria costs are allocated to the producing departments based on budgeted number of employees,and fixed costs are allocated based on the capacity number of employees.Variable maintenance costs are allocated on the budgeted number of direct labour hours,and fixed costs are allocated on labour hour capacity.The data concerning next year's operations are as follows: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Support Departments\quad\quadProducing Departments}$ Budgeted costs: Cafeteria Maintenance Mixing Packaging Variable costs \ 60,000 \ 84,000 \ 300,000 \ 324,000 Fixed costs 18.000 30.000 120.000 140.000 Other data: Direct labour hours (capacity) 10,000 20,000 Direct labour hours (budgeted) 8,000 16,000 Number of employees (capacity) 30 60 Number of employees (budgeted) 20 40 Machine hours (capacity) 33,000 66,000 Machine hours (budgeted) 20,000 60,000 a.Prepare a schedule showing the allocation of budgeted support department costs to producing departments. b.Determine the predetermined overhead rate for the producing departments.

Otto Inc.began the current period with no inventories.During the period,it processed 50,000 kilograms of materials costing $450,000.Conversion costs incurred during the period amounted to $660,000.The firm ended the period with no work in process.During the period,the firm produced 16,000,24,000,and 10,000 units of X,Y,and Z,respectively.All costs are considered joint costs.The firm sold 12,000 units of X,16,000 units of Y,and 9,000 units of Z.X sells for $30 per unit,Y for $44 per unit,and Z for $4 per unit.The firm uses the net realizable value method for cost allocation.Z is considered a by-product. a.Discuss the following methods to account for by-products: • other income • replacement cost • joint cost proration b.Give three examples of by-products.

Which of the following allocation methods fully recognizes services that support departments provide to each other?

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: Sales Value Product Units Produced at Split-Off W 10,000 \ 5,000 X 6,000 2,500 Y 16,000 3,000 Z 8,000 4,500 - What is the amount of joint costs assigned to Product X using the sales-value-at-split-off method?

Quan Company has three support departments whose direct department costs are $20,000,$30,000,and $40,000,respectively,and two producing departments whose direct department costs are $400,000 and $360,000,respectively.What is the combined total department cost for the producing departments after allocation of the support departments?

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.If the Corporate Department used 190,000 pages,what would be the printing charges for the Corporate Department (rounded to the nearest dollar)?

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: Sales Value Product Units Produced at Split-Off W 10,000 \ 5,000 X 6,000 2,500 Y 16,000 3,000 Z 8,000 4,500 - What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?

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 both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips,what will the West Sales Territory be charged for the year (rounded to the nearest dollar)?

Which of the following industries would most likely have joint costs in production?

What is a disadvantage of the costs of support departments being allocated to production departments?

Morris Manufacturing Company has two support departments,Maintenance Department and Personnel Department,and two producing departments,X and Y.The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $4,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $9,000 and $15,000,respectively. Data on standard service hours and number of employees are as follows: Maint. Person. Dept. Dept Standard service hours used 100 75 600 300 Number of employees 50 100 150 150 Dirert lahnur houre 125 125 500 250 - What are the total overhead costs associated with Department X after allocating the Maintenance and Personnel Departments using the direct method?

Beef Products produces two products,hamburger and steaks,in a single process.In the current year,the joint costs of this process were $36,000.In addition,20,000 kilograms of hamburger and 10,000 kilograms of steaks were produced.Separable processing costs beyond the split-off point were: hamburger,$7,500; steaks,$4,500.Hamburger sells for $2 per kilogram; steaks sell for $4 per kilogram. a.Allocate the joint costs using the net realizable value method. b.Allocate the joint costs using the physical units method.

Which of the following is a by-product of agricultural and food industries?