Exam 12: Cost Allocation

Hernandez 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 operating income for all three products for Customer Type 1?

The two methods for allocating service department costs to other departments are ________.

The step-down method sequence of allocations begins with the service department that renders the greatest service to the greatest number of other service departments.

The Technical Services Department of Michigan State University leased a photocopy machine for $1,500 per month plus $0.04 per copy.Additional budgeted variable operating costs were $0.02 per copy.The Technical Services Department estimated the machine would produce 30,000 copies per month.The Accounting Department estimated is would make 6,000 copies per month but actually made 5,000 copies.Assume fixed and variable cost pools are allocated separately.What is the amount of variable cost allocated to the Accounting Department for the month?

What formula should be used to allocate variable costs from service departments to user departments?

Kevin Company has two service departments,Maintenance and Personnel.Kevin 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 Personnel Department is allocated first.What is the amount of cost allocated from the Personnel Department to the Finishing Department?

Simon 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 operating profit or loss for all three products for Customer Type 2?

A reason for using capacity available instead of capacity used when allocating fixed costs from service departments to producing departments is ________.

Joint costs are incurred ________.

Companies must assign all production costs and only production costs to products for external financial reporting purposes.

Many companies develop ________ to assign service department costs to production departments.

A large percentage of companies use sales revenue as a cost allocation base for allocating central corporate costs.Sales revenue is ________.

Service departments in organizations exist to support ________ departments or ________.

When using the "ability to bear" philosophy in allocating central service costs,actual sales are preferred over budgeted sales.

If a company allocated fixed costs from service departments to user departments based on long-range plans,there is a tendency on the part of managers to underestimate their planned usage.

Joint cost allocations should be ignored for decisions such as selling a joint product at the split-off point or processing it further.

In the step-down method,the first service department used in the sequence to allocate service department costs is the department that renders the ________ departments.

Variable and fixed costs from service departments should be allocated separately to user departments.

Serena Company has two service departments,Maintenance and Personnel.Serena 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.The amount of cost allocated from the Maintenance Department to the Finishing Department would be ________.

Fudge Company manufactures three products from a joint process.Joint costs for the year amounted to $250,000.The following data was available: Assume the relative-sales-value method of allocating joint costs is used.What amount of joint costs is allocated to Product Y?