Question 1

When the order of support department cost allocation must be determined, any reasonable procedure for ranking the support departments is acceptable.

Accepted Answer

A) True 
 B)False

Question 2

The method that allocates support department costs by ignoring all services rendered between support departments is:

Accepted Answer

A)  the direct method 
B)  the step-down method 
C)  the reciprocal method 
D)  the dual-rate method 
A)  the direct method 
B)  the step-down method 
C)  the reciprocal method 
D)  the dual-rate method

Question 3

Which of these is a limitation of allocating support department costs?

Accepted Answer

A)  identifying appropriate cost pools 
B)  the subjective nature of the exercise 
C)  the possibility of managers mistakenly believing that allocated costs are variable 
D)  all of the above are limitations 
A)  identifying appropriate cost pools 
B)  the subjective nature of the exercise 
C)  the possibility of managers mistakenly believing that allocated costs are variable 
D)  all of the above are limitations

Question 4

Under the reciprocal method, the total costs allocated out of the support departments exceed the total costs of the support departments before cost allocation began.

Accepted Answer

A) True 
 B)False

Question 5

A cost object cannot be:

Accepted Answer

A)  a geographic region 
B)  a customer 
C)  a department 
D)  none of the above, i.e. all can be cost objects 
A)  a geographic region 
B)  a customer 
C)  a department 
D)  none of the above, i.e. all can be cost objects

Question 6

In determining the amount of indirect costs to be allocated to the cost object the first step is:

Accepted Answer

A)  to develop a cost allocation formula 
B)  to decide on the number of cost pools 
C)  to select a cost driver 
D)  to develop a predetermined cost rate 
A)  to develop a cost allocation formula 
B)  to decide on the number of cost pools 
C)  to select a cost driver 
D)  to develop a predetermined cost rate

Question 7

A cost object is a thing or activity for which costs need to be measured for decision making.

Accepted Answer

A) True 
 B)False

Question 8

The reciprocal method is more likely to cause support department managers to control their use of other support department services than is the direct method.

Accepted Answer

A) True 
 B)False

Question 9

Under the direct method of allocating support department costs the cost objects of interest are the operating departments.

Accepted Answer

A) True 
 B)False

Question 10

Coburg Plumbing estimates that its overhead costs for the year will be $1,800,000 and it has decided to use direct labour hours as the cost driver. Its markup is 20% on cost. If a job for Martin S. used $400 of direct materials and 8 labour hours at $50 per hour how much will Coburg Plumbing charge Martin S?

Accepted Answer

A)  $960 
B)  $800 
C)  $1360 
D)  cannot be calculated from the information given 
A)  $960 
B)  $800 
C)  $1360 
D)  cannot be calculated from the information given

Question 11

Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments.   For the step-down method, what proportion of the Maintenance Department's costs will be allocated to the Assembly Department if the allocation order is Personnel, Cafeteria and Maintenance?

Accepted Answer

A)  20% 
B)  28.6% 
C)  42.9% 
D)  30% 
A)  20% 
B)  28.6% 
C)  42.9% 
D)  30%

Question 12

Which of these is not a way in which the quality of support department cost allocations can be improved?

Accepted Answer

A)  Consider perceived fairness 
B)  Educate managers concerning the meaning of allocations 
C)  Avoid the more complicated methods 
D)  None of the above, i.e. all are ways in which the quality of support department cost allocations can be improved 
A)  Consider perceived fairness 
B)  Educate managers concerning the meaning of allocations 
C)  Avoid the more complicated methods 
D)  None of the above, i.e. all are ways in which the quality of support department cost allocations can be improved

Question 13

Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments.   For the reciprocal method, what proportion of the Personnel' Department's costs will be allocated to the Machining Department?

Accepted Answer

A)  30% 
B)  42.9% 
C)  20% 
D)  28.6% 
A)  30% 
B)  42.9% 
C)  20% 
D)  28.6%

Question 14

A company must use the same method for allocating all support department costs to operating departments.

Accepted Answer

A) True 
 B)False

Question 15

Indirect costs are traced and direct costs are allocated.

Accepted Answer

A) True 
 B)False

Question 16

The allocation method for support department costs that requires ranking of support departments in terms of service provided to other support departments is:

Accepted Answer

A)  the direct method 
B)  the step-down method 
C)  the reciprocal method 
D)  the dual-rate method 
A)  the direct method 
B)  the step-down method 
C)  the reciprocal method 
D)  the dual-rate method

Question 17

Indirect costs are

Accepted Answer

A)  costs that it is impossible to trace to a cost object 
B)  costs that cannot be traced to a cost object in an economic manner 
C)  the same as fixed costs 
D)  B and C 
A)  costs that it is impossible to trace to a cost object 
B)  costs that cannot be traced to a cost object in an economic manner 
C)  the same as fixed costs 
D)  B and C

Question 18

To avoid passing on inefficiencies of the support departments, support department costs should be allocated using:

Accepted Answer

A)  a budgeted cost allocation rate 
B)  an actual cost allocation rate 
C)  only fixed costs per unit of service 
D)  only variable costs per unit of service 
A)  a budgeted cost allocation rate 
B)  an actual cost allocation rate 
C)  only fixed costs per unit of service 
D)  only variable costs per unit of service

Question 19

The same cost that is a direct cost for one cost object can be an indirect cost for a different cost object.

Accepted Answer

A) True 
 B)False

Question 20

Which of these is not an allocation method commonly used to allocate support department costs to operating departments?

Accepted Answer

A)  indirect method 
B)  direct method 
C)  step-down method 
D)  none of the above, i.e. all are allocation methods commonly used to allocate support department costs to operating departments 
A)  indirect method 
B)  direct method 
C)  step-down method 
D)  none of the above, i.e. all are allocation methods commonly used to allocate support department costs to operating departments

When the order of support department cost allocation must be determined, any reasonable procedure for ranking the support departments is acceptable.

The method that allocates support department costs by ignoring all services rendered between support departments is:

Which of these is a limitation of allocating support department costs?

Under the reciprocal method, the total costs allocated out of the support departments exceed the total costs of the support departments before cost allocation began.

A cost object cannot be:

In determining the amount of indirect costs to be allocated to the cost object the first step is:

A cost object is a thing or activity for which costs need to be measured for decision making.

The reciprocal method is more likely to cause support department managers to control their use of other support department services than is the direct method.

Under the direct method of allocating support department costs the cost objects of interest are the operating departments.

Which of these is not a way in which the quality of support department cost allocations can be improved?

Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments. For the reciprocal method, what proportion of the Personnel' Department's costs will be allocated to the Machining Department?

A company must use the same method for allocating all support department costs to operating departments.

Indirect costs are traced and direct costs are allocated.

The allocation method for support department costs that requires ranking of support departments in terms of service provided to other support departments is:

Indirect costs are

To avoid passing on inefficiencies of the support departments, support department costs should be allocated using:

The same cost that is a direct cost for one cost object can be an indirect cost for a different cost object.

Which of these is not an allocation method commonly used to allocate support department costs to operating departments?

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

Exam 3: A Costing Framework and Cost Allocation

When the order of support department cost allocation must be determined, any reasonable procedure for ranking the support departments is acceptable.

The method that allocates support department costs by ignoring all services rendered between support departments is:

Which of these is a limitation of allocating support department costs?

Under the reciprocal method, the total costs allocated out of the support departments exceed the total costs of the support departments before cost allocation began.

A cost object cannot be:

In determining the amount of indirect costs to be allocated to the cost object the first step is:

A cost object is a thing or activity for which costs need to be measured for decision making.

The reciprocal method is more likely to cause support department managers to control their use of other support department services than is the direct method.

Under the direct method of allocating support department costs the cost objects of interest are the operating departments.

Which of these is not a way in which the quality of support department cost allocations can be improved?

Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments. For the reciprocal method, what proportion of the Personnel' Department's costs will be allocated to the Machining Department?

A company must use the same method for allocating all support department costs to operating departments.

Indirect costs are traced and direct costs are allocated.

The allocation method for support department costs that requires ranking of support departments in terms of service provided to other support departments is:

Indirect costs are

To avoid passing on inefficiencies of the support departments, support department costs should be allocated using:

The same cost that is a direct cost for one cost object can be an indirect cost for a different cost object.

Which of these is not an allocation method commonly used to allocate support department costs to operating departments?

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters