Question 1

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 2

A bundled product is a package of two or more products (or services)that is sold for a single price although the individual components may be sold as separate items at their own 'stand-alone' prices.

Accepted Answer

A) True 
 B)False

Question 3

Cost-based prices:

Accepted Answer

A) provide an inherent incentive for the producer to control costs. 
B) pass the majority of risk to the buyer. 
C) are a good way of setting prices in a competitive market. 
D) All of the above. 
A) provide an inherent incentive for the producer to control costs. 
B) pass the majority of risk to the buyer. 
C) are a good way of setting prices in a competitive market. 
D) All of the above.

Question 4

Answer the following questions using the information below:
Mark,owner of Waugh Fiberglass Fabricators is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
 $$\begin{array}{l}
\text { Buigeted manuficturing overhead costs: }\
\begin{array} { l l l } 
\text { Flant Maintenance } & \text { PM (Support Dept) } & \$ 350000 \
\text { Data Frocessing } & \text { DP (Support Dept) } & \$ 75000 \
\text { Machining } & \text { M (Operating Dept) } & \$ 225000 \
\text { Capping } & \text { C (Operating Dept) } & \$ 125000
\end{array}
\end{array}$$ Services furnished:
By Plant Maintenance (budgeted labour-hours):
 $\begin{array} { l l } \text { to Data Processing } & 3500 \ \text { to Machining } & 5000 \ \text { to Capping } & 8200 \end{array}$

By Data Frocessing (bud geted computer time):

$\begin{array}{ll}
\text { to Flant Maintenance } & 600 \
\text { to Machining } & 3500 \
\text { to Capping } & 600
\end{array}$
-What is the complete reciprocated cost of the Plant Maintenance Department?

Accepted Answer

A) $365 000 
B) $369 459 
C) $375 773 
D) $393 750 
A) $365 000 
B) $369 459 
C) $375 773 
D) $393 750

Question 5

If incremental users are newly formed companies or subunits,such as a new product line or a new sales territory,the _________________ method may enhance their chances for survival in the short run by assigning them a low allocation of the common costs.

Accepted Answer

A) reciprocal 
B) stand-alone 
C) incremental 
D) step-down 
A) reciprocal 
B) stand-alone 
C) incremental 
D) step-down

Question 6

The__________ method requires the support departments to be ranked (sequenced)in the order in which the step-down allocation is to proceed.

Accepted Answer

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

Question 7

When budgeted cost-allocation rates are used,variations in actual usage by one division affect the costs allocated to other divisions.

Accepted Answer

A) True 
 B)False

Question 8

Benefits of the dual-rate method include:

Accepted Answer

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

Question 9

Many commercial contracts include clauses based on ___________ accounting information.

Accepted Answer

A) financial 
B) cost 
C) internal 
D) international 
A) financial 
B) cost 
C) internal 
D) international

Question 10

Contract disputes regarding cost-allocation can be reduced by defining:

Accepted Answer

A) the cost items allowed. 
B) permissible cost-allocation bases. 
C) the terms used,such as what constitutes direct labour. 
D) All of these answers are correct. 
A) the cost items allowed. 
B) permissible cost-allocation bases. 
C) the terms used,such as what constitutes direct labour. 
D) All of these answers are correct.

Question 11

Under the step-down method,once a support department's costs have been allocated,no subsequent support-department costs are allocated back to it.

Accepted Answer

A) True 
 B)False

Question 12

When using the single-rate method,what should the fixed cost allocation be based?

Accepted Answer

A) Budgeted usage 
B) Actual usage 
C) Incremental cost allocation 
D) Either A or B are correct. 
A) Budgeted usage 
B) Actual usage 
C) Incremental cost allocation 
D) Either A or B are correct.

Question 13

Explain the two methods of allocating revenues of a bundled package to the individual products in that package.Describe any special problems associated with each method.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Method 1.The stand-alone revenue-allocat

Question 14

Answer the following questions using the information below:
Adelaide 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:
 $$\begin{array} { | c | c | c |c| c | c | } 
\hline & \begin{array} { c } 
\text { Stand-Alone } \
\text { Selling Price }
\end{array} & \text { Cost } && \text { Package } & \begin{array} { c } 
\text { Packaged } \
\text { Price }
\end{array} \
\hline \text { Reading Fun } & \$ 55 & \$ 7.20 && \text { 1. Reading Fun \& Math Fun } & \$ 98 \
\hline \text { Math Fun } & \$ 65 & \$ 8.00 && \text { 2. Reading Fun \& Science } & \$ 122 \
\hline \text { Science } & \$ 95 & \$ 10.00 && \text { 3. All three } & \$ 162 \
\hline
\end{array}$$
-Using the incremental method,what amount of revenue will be allocated to Math Fun in the package that contains all three products? Assume Reading Fun is the primary product,followed by Math Fun,and then Science.

Accepted Answer

A) $50.67 
B) $65.00 
C) $45.60 
D) $48.25 
A) $50.67 
B) $65.00 
C) $45.60 
D) $48.25

Question 15

Budgeted amounts for a support department will always exceed complete reciprocated costs for that department.

Accepted Answer

A) True 
 B)False

Question 16

Answer the following questions using the information below:
The Darwin Harbour Corporation currently leases a corporate suite in an office building for a cost of $90 000 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 $10 000.
-If the incremental method were used,what amount of cost would be allocated to the start-up business?

Accepted Answer

A) $10 000 
B) $30 000 
C) $27 000 
D) $37 000 
A) $10 000 
B) $30 000 
C) $27 000 
D) $37 000

Question 17

Answer the following questions using the information below:
Adelaide 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:
 $$\begin{array} { | c | c | c |c| c | c | } 
\hline & \begin{array} { c } 
\text { Stand-Alone } \
\text { Selling Price }
\end{array} & \text { Cost } && \text { Package } & \begin{array} { c } 
\text { Packaged } \
\text { Price }
\end{array} \
\hline \text { Reading Fun } & \$ 55 & \$ 7.20 && \text { 1. Reading Fun \& Math Fun } & \$ 98 \
\hline \text { Math Fun } & \$ 65 & \$ 8.00 && \text { 2. Reading Fun \& Science } & \$ 122 \
\hline \text { Science } & \$ 95 & \$ 10.00 && \text { 3. All three } & \$ 162 \
\hline
\end{array}$$
-Using the stand-alone method with selling price as the weight for revenue allocation,what amount of revenue will be allocated to Math Fun in the package that contains all three products?

Accepted Answer

A) $50.67 
B) $48.25 
C) $48.98 
D) $65.00 
A) $50.67 
B) $48.25 
C) $48.98 
D) $65.00

Question 18

Why would businesses want to sell bundled products? What benefits,if any,are there for the consumer?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Businesses seek to sell bundled products

Question 19

A revenue object is anything for which a separate measurement of revenue is desired.

Accepted Answer

A) True 
 B)False

Question 20

Under the incremental method,the _________ party typically receives the highest allocation of the common costs.

Accepted Answer

A) first incremental 
B) primary 
C) second incremental 
D) tertiary 
A) first incremental 
B) primary 
C) second incremental 
D) tertiary

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

A bundled product is a package of two or more products (or services)that is sold for a single price although the individual components may be sold as separate items at their own 'stand-alone' prices.

Cost-based prices:

If incremental users are newly formed companies or subunits,such as a new product line or a new sales territory,the _________________ method may enhance their chances for survival in the short run by assigning them a low allocation of the common costs.

The__________ method requires the support departments to be ranked (sequenced)in the order in which the step-down allocation is to proceed.

When budgeted cost-allocation rates are used,variations in actual usage by one division affect the costs allocated to other divisions.

Benefits of the dual-rate method include:

Many commercial contracts include clauses based on ___________ accounting information.

Contract disputes regarding cost-allocation can be reduced by defining:

Under the step-down method,once a support department's costs have been allocated,no subsequent support-department costs are allocated back to it.

When using the single-rate method,what should the fixed cost allocation be based?

Explain the two methods of allocating revenues of a bundled package to the individual products in that package.Describe any special problems associated with each method. _ _

Budgeted amounts for a support department will always exceed complete reciprocated costs for that department.

Why would businesses want to sell bundled products? What benefits,if any,are there for the consumer? _ _

A revenue object is anything for which a separate measurement of revenue is desired.

Under the incremental method,the _________ party typically receives the highest allocation of the common costs.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Exam 14: Allocation of Support-Department Costs, Common Costs and Revenues

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

A bundled product is a package of two or more products (or services)that is sold for a single price although the individual components may be sold as separate items at their own 'stand-alone' prices.

Cost-based prices:

If incremental users are newly formed companies or subunits,such as a new product line or a new sales territory,the _________________ method may enhance their chances for survival in the short run by assigning them a low allocation of the common costs.

The__________ method requires the support departments to be ranked (sequenced)in the order in which the step-down allocation is to proceed.

When budgeted cost-allocation rates are used,variations in actual usage by one division affect the costs allocated to other divisions.

Benefits of the dual-rate method include:

Many commercial contracts include clauses based on ___________ accounting information.

Contract disputes regarding cost-allocation can be reduced by defining:

Under the step-down method,once a support department's costs have been allocated,no subsequent support-department costs are allocated back to it.

When using the single-rate method,what should the fixed cost allocation be based?

Budgeted amounts for a support department will always exceed complete reciprocated costs for that department.

Why would businesses want to sell bundled products? What benefits,if any,are there for the consumer? _____________________________________________________________________________________________ _____________________________________________________________________________________________

A revenue object is anything for which a separate measurement of revenue is desired.

Under the incremental method,the _________ party typically receives the highest allocation of the common costs.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Why would businesses want to sell bundled products? What benefits,if any,are there for the consumer? _ _