Question 1

If a company allocates costs of central services based on sales,________ should be used as the allocation base.

Accepted Answer

A) actual usage 
B) estimated usage 
C) actual sales 
D) budgeted sales 
A) actual usage 
B) estimated usage 
C) actual sales 
D) budgeted sales

Question 2

Tardy Company has two service departments,Maintenance and Personnel.Tardy Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees.The following information has been gathered for the current year:   If the direct method is used to allocate service department costs,then the cost allocated from the Personnel Department to the Finishing Department is ________.

Accepted Answer

A) $14,147 
B) $16,800 
C) $20,000 
D) $33,600 
A) $14,147 
B) $16,800 
C) $20,000 
D) $33,600

Question 3

Thomas Company has two service departments,Maintenance and Personnel.Thomas Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees.The following information has been gathered for the current year:   Assume the step-down method is used to allocate service department costs and the Maintenance Department is allocated first.What are the total costs of the Mixing Department after allocation of service department costs?

Accepted Answer

A) $210,750 
B) $275,500 
C) $277,000 
D) $279,250 
A) $210,750 
B) $275,500 
C) $277,000 
D) $279,250

Question 4

Hamada Company has two departments.Relevant information is presented below:   Total company-wide advertising costs are $360,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 2?

Accepted Answer

A) $37,500 
B) $50,000 
C) $262,500 
D) $300,000 
A) $37,500 
B) $50,000 
C) $262,500 
D) $300,000

Question 5

Patti Company has two service departments,Maintenance and Personnel.Patti Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees.The following information has been gathered for the current year:   If the direct method is used to allocate service department costs,then the total cost of the Finishing Department after allocation would be ________.

Accepted Answer

A) $48,000 
B) $54,000 
C) $175,000 
D) $277,000 
A) $48,000 
B) $54,000 
C) $175,000 
D) $277,000

Question 6

Bush Company has two departments.Relevant information is presented below:   Total company-wide advertising costs are $540,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 1?

Accepted Answer

A) $37,500 
B) $108,000 
C) $250,000 
D) $262,500 
A) $37,500 
B) $108,000 
C) $250,000 
D) $262,500

Question 7

Samuel Company has two production departments called Mixing and Finishing.The maintenance department serves both production departments.Budgeted fixed costs for the maintenance department are $40,000.Budgeted variable costs for the maintenance department are $4.00 per labor hour.Other relevant data follow:   Actual maintenance department costs:
  The amount of fixed maintenance department costs allocated to the Mixing Department should be ________.

Accepted Answer

A) $12,000 
B) $14,000 
C) $20,000 
D) $24,000 
A) $12,000 
B) $14,000 
C) $20,000 
D) $24,000

Question 8

Examples of service departments include human resources and technical support centers.

Accepted Answer

A) True 
 B)False

Question 9

Luxury Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Luxury Company plans to produce 40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of ore.Product C sells for $30 per pound and Product U sells for $40 per pound.Assume the company uses the physical-units method of allocating joint costs.What amount of joint costs is allocated to Product U?

Accepted Answer

A) $0 
B) $100,000 
C) $300,000 
D) $400,000 
A) $0 
B) $100,000 
C) $300,000 
D) $400,000

Question 10

Wilson Company has two departments.Relevant information is presented below:   Total company-wide advertising costs are $300,000.Assume the allocation base is changed from budgeted sales to actual sales.The amount of advertising costs allocated to Department 1 will ________.

Accepted Answer

A) increase $12,500 
B) increase $25,000 
C) decrease $12,500 
D) decrease $25,000 
A) increase $12,500 
B) increase $25,000 
C) decrease $12,500 
D) decrease $25,000

Question 11

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Accepted Answer

A) service departments 
B) service departments and producing departments 
C) revenue-producing departments 
D) revenue-producing products 
A) service departments 
B) service departments and producing departments 
C) revenue-producing departments 
D) revenue-producing products

Question 12

Which of the following items is NOT a cost driver representing an "ability to bear" philosophy for cost allocation?

Accepted Answer

A) revenue of each division 
B) cost of goods sold by each division 
C) total costs of each division before allocation of central costs 
D) usage 
A) revenue of each division 
B) cost of goods sold by each division 
C) total costs of each division before allocation of central costs 
D) usage

Question 13

Two conventional ways of allocating joint costs to products are ________.

Accepted Answer

A) physical units and incremental revenues 
B) physical units and incremental expenses 
C) separable costs and relative sales values 
D) physical units and relative sales values 
A) physical units and incremental revenues 
B) physical units and incremental expenses 
C) separable costs and relative sales values 
D) physical units and relative sales values

Question 14

Roller Company has two service departments,Maintenance and Personnel.Roller Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees.The following information has been gathered for the current year:   If the direct method is used to allocate service department costs,then the total cost of the Personnel Department after the Maintenance Department cost allocation would be ________.

Accepted Answer

A) $33,600 
B) $38,640 
C) $39,900 
D) $63,480 
A) $33,600 
B) $38,640 
C) $39,900 
D) $63,480

Question 15

Herman Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available:     If activity-based costing is used,the total cost assigned to the deluxe model is ________.

Accepted Answer

A) $22,500 
B) $26,625 
C) $33,375 
D) $37,500 
A) $22,500 
B) $26,625 
C) $33,375 
D) $37,500

Question 16

In practice,companies often inappropriately allocate fixed cost pools for service departments to producing departments on the basis of ________ instead of ________.

Accepted Answer

A) budgeted costs; actual costs 
B) actual costs; budgeted costs 
C) capacity used; capacity available 
D) capacity available; capacity used 
A) budgeted costs; actual costs 
B) actual costs; budgeted costs 
C) capacity used; capacity available 
D) capacity available; capacity used

Question 17

Cardinal Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Cardinal Company plans to produce 40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of ore.Product C cannot be sold at the split-off point and must be processed further at a cost of $100,000,after which it can be sold for $45 per pound.Product U sells for $40 per pound.What amount of joint costs is allocated to Product C?

Accepted Answer

A) $384,000 
B) $720,000 
C) $800,000 
D) $816,000 
A) $384,000 
B) $720,000 
C) $800,000 
D) $816,000

Question 18

The greatest virtue of the step-down method for allocating service department costs is ________.

Accepted Answer

A) its simplicity 
B) its ability to allocate production department costs to service departments 
C) its ability to allocate user department costs to production departments 
D) the recognition of reciprocal relationships between service departments 
A) its simplicity 
B) its ability to allocate production department costs to service departments 
C) its ability to allocate user department costs to production departments 
D) the recognition of reciprocal relationships between service departments

Question 19

Ernie Company makes three types of products.The company has two types of customers.The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations.The following data are available:     What is the cost to serve for Customer Type 1?

Accepted Answer

A) $2,400 
B) $6,000 
C) $9,600 
D) $12,000 
A) $2,400 
B) $6,000 
C) $9,600 
D) $12,000

Question 20

The ________ method recognizes that some service departments support the activities in other service departments as well as those in production departments.

Accepted Answer

A) direct 
B) indirect 
C) step-down 
D) cost driver 
A) direct 
B) indirect 
C) step-down 
D) cost driver

If a company allocates costs of central services based on sales,________ should be used as the allocation base.

Hamada Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $360,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 2?

Bush Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $540,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 1?

Examples of service departments include human resources and technical support centers.

Wilson Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $300,000.Assume the allocation base is changed from budgeted sales to actual sales.The amount of advertising costs allocated to Department 1 will ________.

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Which of the following items is NOT a cost driver representing an "ability to bear" philosophy for cost allocation?

Two conventional ways of allocating joint costs to products are ________.

Herman Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available: If activity-based costing is used,the total cost assigned to the deluxe model is ________.

In practice,companies often inappropriately allocate fixed cost pools for service departments to producing departments on the basis of instead of .

The greatest virtue of the step-down method for allocating service department costs is ________.

The ________ method recognizes that some service departments support the activities in other service departments as well as those in production departments.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 12: Cost Allocation

If a company allocates costs of central services based on sales,________ should be used as the allocation base.

Hamada Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $360,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 2?

Bush Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $540,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 1?

Examples of service departments include human resources and technical support centers.

Wilson Company has two departments.Relevant information is presented below: Total company-wide advertising costs are $300,000.Assume the allocation base is changed from budgeted sales to actual sales.The amount of advertising costs allocated to Department 1 will ________.

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Which of the following items is NOT a cost driver representing an "ability to bear" philosophy for cost allocation?

Two conventional ways of allocating joint costs to products are ________.

Herman Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available: If activity-based costing is used,the total cost assigned to the deluxe model is ________.

In practice,companies often inappropriately allocate fixed cost pools for service departments to producing departments on the basis of ________ instead of ________.

The greatest virtue of the step-down method for allocating service department costs is ________.

The ________ method recognizes that some service departments support the activities in other service departments as well as those in production departments.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

In practice,companies often inappropriately allocate fixed cost pools for service departments to producing departments on the basis of instead of .