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

An advantage of the reciprocal method is that it highlights the complete reciprocated costs of support departments and how these costs differ from budgeted or actual costs of the departments.

Answer the following questions using the information below: Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $150,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Support Departments Production Departments Warehouse Department Data Center Department Music Books Budgeted costs \ 350,000 \ 150,000 \ 125,000 \ 150,000 Budgeted warehouse-hours NA 500 1,000 1,500 Number of computer hours 200 NA 800 1,000 -Using the step-down method,what amount of Warehouse Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Which of the following is included in an explicit written contract for cost allocation?

The stand-alone revenue-allocation method ________.

To give more weight to the product that most likely drives the sales of the bundled product,the revenue allocation should be weighted using ________.

Software For You encounters revenue-allocation decisions with its bundled product sales.Here,two or more units of the software are sold as a single package.Managers at Software For You are keenly interested in individual product-profitability figures.Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows: Stand-Alone Selling Price, Cost Word Processing (WP) \ 125 \ 18 Spreadsheet (SS) \ 150 \ 20 Accounting Software (AS) \ 225 \ 25 Package Packaged Price WP \& SS \ 220 WP \& AS \ 280 All three \ 380 Required: a.Using the stand-alone revenue-allocation method,allocate the $380 packaged price of "All Three" to the three software products 1.with selling prices as the weights. 2.with individual product costs as the weights. 3.based on physical units. b.Allocate the $380 packaged price of "All Three" to the three software products using the incremental revenue-allocation method.Assume Word Processing is the primary product,followed by Spreadsheet,and then Accounting Software.

Approaches used to rank products for revenue allocation can include ________.

Answer the following questions using the information below: The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year: Budgeted costs of operating the copying facility for 400,000 to 600,000 copies: Fixed costs per year \6 0,000 Variable costs 3 cents (.03) per copy Budgeted long-run usage in copies per year: Marketing Department 120,000 copies Operations Department 380,000 copies Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. -If a dual-rate cost-allocation method is used,what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

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

Which of the following is an advantage of a dual-rate method?

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

The biggest advantage of using practical capacity to allocate costs is that it ________.

Answer the following questions using the information below: Emrald Corp currently uses a manufacturing facility costing $500,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 5%. -If the incremental method were used,what amount of cost would be allocated to the start-up business?

Businesses offer bundled products to ________.

Cost-based prices ________.

Tryst University offers only high-tech graduate-level programs.Tryst has two principal operating departments,Engineering and Social 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 $450,000,while the Enrollment Services budget is $900,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department: $\text { Services Provided: (Annually) }$ Budget Engineering Social Sciences F\&T Maintenance Enrollment Service Mar (in hourtenance \ 450,000 3,000 6,000 Zero 1,000 Enrollment Service in credit hrs) \ 900,000 25,000 35,000 2,000 Zero Required: Use the direct method to allocate support costs to each of the two principal operating departments,Engineering and Social Sciences.Prepare a schedule showing the support costs allocated to each department.

John Peters is drafting the provisions of a cost-plus contract and is concerned with ironing out any possible misunderstandings during the life of the contract.What advice can you provide to reduce contract disputes over reimbursement amounts based on costs?

Which of the following is a disadvantage of a dual-rate method?

Answer the following questions using the information below: The Speedjet 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: Fixed costs per year \8 ,000,000 Variable costs \ 70 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 80,000 technician hours Small Plane Department 70,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 65,000 technician hours. -If a single-rate cost-allocation method is used,what is the allocation rate per hour used?

Answer the following questions using the information below: Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $150,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Support Departments Production Departments Warehouse Department Data Center Department Music Books Budgeted costs \ 350,000 \ 150,000 \ 125,000 \ 150,000 Budgeted warehouse-hours NA 500 1,000 1,500 Number of computer hours 200 NA 800 1,000 -Using the step-down method,what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)