Question 1

The method that allocates costs in each cost pool using the same rate per unit is known as the:

Accepted Answer

A) incremental cost-allocation method 
B) reciprocal cost-allocation method 
C) single-rate cost allocation method 
D) dual-rate cost-allocation method 
A) incremental cost-allocation method 
B) reciprocal cost-allocation method 
C) single-rate cost allocation method 
D) dual-rate cost-allocation method

Question 2

Benefits of the single-rate method include:

Accepted Answer

A) it is easier to calculate 
B) fixed costs that are transformed into variable costs for user decision making 
C) signals regarding how variable and fixed costs behave differently 
D) information that leads to outsourcing decisions that benefit the organization as a whole 
A) it is easier to calculate 
B) fixed costs that are transformed into variable costs for user decision making 
C) signals regarding how variable and fixed costs behave differently 
D) information that leads to outsourcing decisions that benefit the organization as a whole

Question 3

The dual-rate cost-allocation method provides better information for decision making than the single-rate method.

Accepted Answer

A) True 
 B)False

Question 4

Gotham University offers only high-tech graduate-level programs. Gotham has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $350,000, while the Enrollment Services budget is $950,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
   Required:
a. Set up algebraic equations in linear equation form for each activity.
b. Determine total costs for each department by solving the equations from part (a)using the reciprocal method.
(Engineering= Eng; Computer Sciences = CS; Facility and Technical Maintenance = FTM; Enrollment Service = ES)

Accepted Answer

a. Eng = $1,400,000

Question 5

Under the incremental revenue-allocation method, there is an incentive to be the last-ranked user.

Accepted Answer

A) True 
 B)False

Question 6

The single-rate cost-allocation method may base the denominator choice on:

Accepted Answer

A) master-budget capacity utilization 
B) normal capacity utilization 
C) practical capacity 
D) All of these answers are correct. 
A) master-budget capacity utilization 
B) normal capacity utilization 
C) practical capacity 
D) All of these answers are correct.

Question 7

Under which allocation method are one-way reciprocal support services recognized?

Accepted Answer

A) direct method 
B) artificial cost method 
C) reciprocal method 
D) step-down method 
A) direct method 
B) artificial cost method 
C) reciprocal method 
D) step-down method

Question 8

Answer the following questions using the information below:
The Quickjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:
Budgeted costs of operating the materials laboratory
for 100,000 to 200,000 technician hours per year:
   Budgeted long-run usage in hours per year:
   Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 65,000 technician hours.
-If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Small Plane Department? Assume budgeted usage is used to allocate materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.

Accepted Answer

A) $8,225,000 
B) $7,825,000 
C) $8,175,000 
D) $7,637,500 
A) $8,225,000 
B) $7,825,000 
C) $8,175,000 
D) $7,637,500

Question 9

The direct allocation method:

Accepted Answer

A) partially recognizes the services provided among support departments 
B) is also referred to as the sequential method 
C) is conceptually the most precise method 
D) results in allocating only the support costs used by operating departments 
A) partially recognizes the services provided among support departments 
B) is also referred to as the sequential method 
C) is conceptually the most precise method 
D) results in allocating only the support costs used by operating departments

Question 10

The method LEAST likely to cause disputes among product managers is:

Accepted Answer

A) stand-alone revenue-allocation method 
B) incremental revenue-allocation method 
C) the direct revenue-allocation method 
D) All of these answers are correct. 
A) stand-alone revenue-allocation method 
B) incremental revenue-allocation method 
C) the direct revenue-allocation method 
D) All of these answers are correct.

Question 11

Answer the following questions using the information below:
The Cold Spring Harbor Corporation currently leases a corporate suite in an office building for a cost of $180,000 a year. Only 70% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 30% of the suite and increase the overall costs of maintaining the space by $20,000.
-If the incremental method were used, what amount of cost would be allocated to the start-up business?

Accepted Answer

A) $20,000 
B) $54,000 
C) $60,000 
D) $74,000 
A) $20,000 
B) $54,000 
C) $60,000 
D) $74,000

Question 12

The incremental method of allocating common costs often creates the incentive to be the first-ranked user.

Accepted Answer

A) True 
 B)False

Question 13

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1)the stand-alone revenue-method and 2)the incremental revenue-allocation method.

Accepted Answer

A) True 
 B)False

Question 14

The direct method allocates each support department's costs to operating departments only.

Accepted Answer

A) True 
 B)False

Question 15

In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.

Accepted Answer

A) True 
 B)False

Question 16

The support department allocation method that is the most widely used because of its simplicity is the:

Accepted Answer

A) step-down method 
B) reciprocal allocation method 
C) direct allocation method 
D) sequential allocation method 
A) step-down method 
B) reciprocal allocation method 
C) direct allocation method 
D) sequential allocation method

Question 17

An example of a bundled product is when a computer software manufacturer charges a single price for the spreadsheet, word processing, and presentation software. on the same CD.

Accepted Answer

A) True 
 B)False

Question 18

Special cost-allocation problems arise when:

Accepted Answer

A) support department costs exceed budgetary estimates 
B) practical capacity is used as the allocation base 
C) support departments provide reciprocal services to other support departments 
D) there is more than one operating department 
A) support department costs exceed budgetary estimates 
B) practical capacity is used as the allocation base 
C) support departments provide reciprocal services to other support departments 
D) there is more than one operating department

Question 19

Revenue allocation is required to determine the profitability of individual items within a bundled product.

Accepted Answer

A) True 
 B)False

Question 20

Give examples of bundled products for each of the following industries:
a. Resort hotel
b. Bank
c. Restaurant
d. Computer store
e. Gasoline service station/convenience store
f. Software manufacturer

Accepted Answer

a. Hotel room plus meals, free drinks, u

The method that allocates costs in each cost pool using the same rate per unit is known as the:

Benefits of the single-rate method include:

The dual-rate cost-allocation method provides better information for decision making than the single-rate method.

Under the incremental revenue-allocation method, there is an incentive to be the last-ranked user.

The single-rate cost-allocation method may base the denominator choice on:

Under which allocation method are one-way reciprocal support services recognized?

The direct allocation method:

The method LEAST likely to cause disputes among product managers is:

The incremental method of allocating common costs often creates the incentive to be the first-ranked user.

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1)the stand-alone revenue-method and 2)the incremental revenue-allocation method.

The direct method allocates each support department's costs to operating departments only.

In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.

The support department allocation method that is the most widely used because of its simplicity is the:

An example of a bundled product is when a computer software manufacturer charges a single price for the spreadsheet, word processing, and presentation software. on the same CD.

Special cost-allocation problems arise when:

Revenue allocation is required to determine the profitability of individual items within a bundled product.

Give examples of bundled products for each of the following industries: a. Resort hotel b. Bank c. Restaurant d. Computer store e. Gasoline service station/convenience store f. Software manufacturer

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 15: Allocation of Support-Department Costs, Common Costs, and Revenues

The method that allocates costs in each cost pool using the same rate per unit is known as the:

Benefits of the single-rate method include:

The dual-rate cost-allocation method provides better information for decision making than the single-rate method.

Under the incremental revenue-allocation method, there is an incentive to be the last-ranked user.

The single-rate cost-allocation method may base the denominator choice on:

Under which allocation method are one-way reciprocal support services recognized?

The direct allocation method:

The method LEAST likely to cause disputes among product managers is:

The incremental method of allocating common costs often creates the incentive to be the first-ranked user.

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1)the stand-alone revenue-method and 2)the incremental revenue-allocation method.

The direct method allocates each support department's costs to operating departments only.

In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.

The support department allocation method that is the most widely used because of its simplicity is the:

An example of a bundled product is when a computer software manufacturer charges a single price for the spreadsheet, word processing, and presentation software. on the same CD.

Special cost-allocation problems arise when:

Revenue allocation is required to determine the profitability of individual items within a bundled product.

Give examples of bundled products for each of the following industries: a. Resort hotel b. Bank c. Restaurant d. Computer store e. Gasoline service station/convenience store f. Software manufacturer

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters