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

Contract disputes regarding cost allocation can be reduced by defining ________.

Buildz Corp has been servicing the Production Casting Department for five years.Beginning next year,the company is adding a Production Molding Department to compliment the materials produced by the Production Casting Department.As a result,data center costs are expected to increase from $800,000 per year to $1,000,000 per year.The Production Molding Department will use 20% of the data center efforts. Required: a.Using the stand-alone cost-allocation method,identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year. b.Using the incremental cost-allocation method,identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.

Max's Movie Store encounters revenue-allocation decisions with its bundled product sales.Here,two or more of the movie videos are sold as a single package.Managers at Max's 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 New Releases \ 15 \ 2.00 Older Releases \ 10 \ 1.50 Classics \ 8 \ 1.25 Package Packaged Price New \& Older \ 20 New \& Classics \ 17 All three \ 25 Required: a.With selling prices as the weights,allocate the $25 packaged price of "All Three" to the three videos using the stand-alone revenue-allocation method. b.Allocate the $25 packaged price of "All Three" to the three types of videos using the incremental revenue-allocation method.Assume New Releases is the primary product,followed by Older Releases,and then Classics.

Under the incremental method of allocating common costs ________.

Both direct and the step-down method can provide relevant information for outsourcing decisions.

Answer the following questions using the information below: Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: $\text { Budgeted manufacturing overhead costs }$ Flant Maintenance PM (Support Dept) \ 350,000 Data Processing DP (Support Dept) \ 75,000 Machining M (Operating Dept) \ 225,000 Capping C (Operating Dept) \ 125,000 $\text { Services furmished: }$ By Plant Maintenance (bud geted labor-hours): to Data Processing 3,500 to Machining 5,000 to Capping 8,200 By Data Processing (bud geted computer time): to Plant Maintenance 600 to Machining 3,500 to Capping 600 -Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

Which of the following is one of the methods of allocating support department costs to operating departments?

The best method to determining weights for the stand-alone revenue-allocation method is ________.

When actual cost-allocations rates are used ________.

Answer the following questions using the information below: Harbor Corp currently leases a corporate suite in an office building for a cost of $280,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,000. -If the stand-alone method were used,what amount of cost would be allocated to the start-up business?