Question 1

Benefits of the dual-rate method include:

Accepted Answer

A) variable costs that are transformed into fixed costs for user decision making 
B) the low cost of implementation 
C) avoidance of expensive analysis for categorizing costs as either fixed or variable 
D) information that leads to outsourcing decisions that benefit the organization as a whole 
A) variable costs that are transformed into fixed costs for user decision making 
B) the low cost of implementation 
C) avoidance of expensive analysis for categorizing costs as either fixed or variable 
D) information that leads to outsourcing decisions that benefit the organization as a whole

Question 2

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the Government Accounting Standards Board (GASB).

Accepted Answer

A) True 
 B)False

Question 3

Van Meter Fig Company has substantial fluctuations in its production costs because of the seasonality of figs.
Would you recommend an actual or budgeted allocation base? Why? Would you recommend calculating monthly, seasonal, or annual allocation rates? Why?

Accepted Answer

The company should use a long-term budge

Question 4

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT one of the three methods of allocating support department costs to operating departments?

Accepted Answer

A) direct method 
B) incremental method 
C) step-down method 
D) reciprocal method 
A) direct method 
B) incremental method 
C) step-down method 
D) reciprocal method

Question 6

Answer the following questions using the information below:
Buzz's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:
  
-Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis.

Accepted Answer

A) $20 
B) $22 
C) $19 
D) $25 
A) $20 
B) $22 
C) $19 
D) $25

Question 7

The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.

Accepted Answer

A) True 
 B)False

Question 8

Allocating common costs is clear-cut and can best be achieved by using the stand-alone cost-allocation method.

Accepted Answer

A) True 
 B)False

Question 9

________ is a package of two or more products (or services)that is sold for a single price but whose individual components may be sold as separate items at their own "stand-alone" prices.

Accepted Answer

A) An assembly 
B) A subassembly 
C) A bundled product 
D) A good deal 
A) An assembly 
B) A subassembly 
C) A bundled product 
D) A good deal

Question 10

Under the incremental method of allocating common costs:

Accepted Answer

A) the parties are interested in being viewed as primary users 
B) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs 
C) fairness and equity are emphasized 
D) there is a disincentive to be titled the primary user 
A) the parties are interested in being viewed as primary users 
B) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs 
C) fairness and equity are emphasized 
D) there is a disincentive to be titled the primary user

Question 11

Complete reciprocated costs:

Accepted Answer

A) are less than the support department's own costs 
B) include the support department's costs plus any interdepartmental cost allocations 
C) are used for step-down allocations 
D) are also referred to as budgeted costs 
A) are less than the support department's own costs 
B) include the support department's costs plus any interdepartmental cost allocations 
C) are used for step-down allocations 
D) are also referred to as budgeted costs

Question 12

Answer the following questions using the information below:
Buzz's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:
  
-Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products?

Accepted Answer

A) $24.12 
B) $30.00 
C) $22.80 
D) $25.33 
A) $24.12 
B) $30.00 
C) $22.80 
D) $25.33

Question 13

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?

Accepted Answer

A common cost is the costs of a cost obj

Question 14

The direct method allocates each support department's costs to operating departments but NOT to other support departments.

Accepted Answer

A) True 
 B)False

Question 15

Under the incremental method, the first incremental user usually receives the highest allocation of the common costs.

Accepted Answer

A) True 
 B)False

Question 16

The reciprocal allocation method:

Accepted Answer

A) is the most widely used because of its simplicity 
B) requires the ranking of support departments in the order that the allocation is to proceed 
C) is conceptually the most precise 
D) results in allocating more support costs to operating departments than actually incurred 
A) is the most widely used because of its simplicity 
B) requires the ranking of support departments in the order that the allocation is to proceed 
C) is conceptually the most precise 
D) results in allocating more support costs to operating departments than actually incurred

Question 17

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:
Use the direct method to allocate support costs to each of the two principal operating departments, Engineering and Computer Sciences. Prepare a schedule showing the support costs allocated to each department.

Accepted Answer

The answer of Gotham University offers only high-tech graduate-level programs....

Question 18

An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.
  
-Using the stand-alone method with manufacturing cost per unit as the weight for revenue allocation, what amount will be allocated to the refrigerator?

Accepted Answer

A) $500.00 
B) $612.50 
C) $620.00 
D) $775.00 
A) $500.00 
B) $612.50 
C) $620.00 
D) $775.00

Question 20

Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

Accepted Answer

A) True 
 B)False

Benefits of the dual-rate method include:

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the Government Accounting Standards Board (GASB).

Van Meter Fig Company has substantial fluctuations in its production costs because of the seasonality of figs. Would you recommend an actual or budgeted allocation base? Why? Would you recommend calculating monthly, seasonal, or annual allocation rates? Why?

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

Which of the following is NOT one of the three methods of allocating support department costs to operating departments?

The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.

Allocating common costs is clear-cut and can best be achieved by using the stand-alone cost-allocation method.

________ is a package of two or more products (or services)that is sold for a single price but whose individual components may be sold as separate items at their own "stand-alone" prices.

Under the incremental method of allocating common costs:

Complete reciprocated costs:

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?

The direct method allocates each support department's costs to operating departments but NOT to other support departments.

Under the incremental method, the first incremental user usually receives the highest allocation of the common costs.

The reciprocal allocation method:

An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice.

Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

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

Benefits of the dual-rate method include:

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the Government Accounting Standards Board (GASB).

Van Meter Fig Company has substantial fluctuations in its production costs because of the seasonality of figs. Would you recommend an actual or budgeted allocation base? Why? Would you recommend calculating monthly, seasonal, or annual allocation rates? Why?

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

Which of the following is NOT one of the three methods of allocating support department costs to operating departments?

The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.

Allocating common costs is clear-cut and can best be achieved by using the stand-alone cost-allocation method.

________ is a package of two or more products (or services)that is sold for a single price but whose individual components may be sold as separate items at their own "stand-alone" prices.

Under the incremental method of allocating common costs:

Complete reciprocated costs:

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?

The direct method allocates each support department's costs to operating departments but NOT to other support departments.

Under the incremental method, the first incremental user usually receives the highest allocation of the common costs.

The reciprocal allocation method:

An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice.

Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

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