Question 1

Under the traditional approach to cost allocation,which of the following steps is NOT used in allocating costs to products?

Accepted Answer

A)  Divide the costs in each producing department, including allocated costs, into direct costs and indirect costs. 
B)  Trace the direct costs to the appropriate products. 
C)  Select cost pools and cost-allocation bases in each producing department and assign all indirect costs to the appropriate cost pool. 
D)  Collect relevant data concerning costs and the physical flow of cost-allocation base units among resources and activities. 
A)  Divide the costs in each producing department, including allocated costs, into direct costs and indirect costs. 
B)  Trace the direct costs to the appropriate products. 
C)  Select cost pools and cost-allocation bases in each producing department and assign all indirect costs to the appropriate cost pool. 
D)  Collect relevant data concerning costs and the physical flow of cost-allocation base units among resources and activities. D

Question 2

Matthew Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available:
$\begin{array} { l  }\text { Direct }&\text { Number of }&\text { Number of }&\text { Number of }\
\text { Product }&\text { Setups }& \text { Components } & \text { Labor Hours }\
\text { Standard } & 22 & 8 & 375 \
\text { Deluxe } & 28 & 12 & 225
\end{array}$

$$\begin{array} { l l c } 
\text { Cost pool } & \text { Total costs } & \text { Cost Driver } \\hline
\text { Setup Costs } & \$ 15,000 & \text { Number of setups} \
\text { Assembly Costs }&\$36,000& \text { Number of components} \
\text { Labor Costs }&\$9,000& \text { Number of direct labor hours} \
\end{array}$$
If activity-based costing is used,the total costs assigned to the standard model are ________.

Accepted Answer

A)  $22,500 
B)  $26,625 
C)  $33,375 
D)  $37,500 
A)  $22,500 
B)  $26,625 
C)  $33,375 
D)  $37,500 B

Question 3

When allocating fixed costs from service departments to production departments,managers should use ________ instead of ________.

Accepted Answer

A)  capacity used; capacity available 
B)  capacity available; budgeted capacity 
C)  capacity used; budgeted capacity 
D)  capacity available; capacity used 
A)  capacity used; capacity available 
B)  capacity available; budgeted capacity 
C)  capacity used; budgeted capacity 
D)  capacity available; capacity used D

Question 4

Karen Company manufactures three products from a joint process.Joint costs for the year amounted to $300,000.The following data was available:
$$\begin{array} { l l l } 
\text { Product } & \text { Units Produced } & \text { sales Value at Split-off } \
\hline X& 5,000 & \$ 70,000 \
Y & 3,000 & \$ 30,000 \
Z & 2,000 & \$ 100,000
\end{array}$$
Assume the physical-units method of allocating joint costs is used.What amount of joint costs is allocated to Product X?

Accepted Answer

A)  $70,000 
B)  $87,500 
C)  $150,000 
D)  $300,000 
A)  $70,000 
B)  $87,500 
C)  $150,000 
D)  $300,000

Question 5

Two popular methods for allocating service department costs to user departments are the direct method and the step-up method.

Accepted Answer

A) True 
 B)False

Question 6

The traditional approach to cost allocation focuses on accumulating and reporting costs by ________.The activity-based approach to cost allocation focuses on accumulating and reporting costs by ________.

Accepted Answer

A)  cost behavior; resources used 
B)  departments; activities 
C)  fixed costs; variable costs 
D)  product; customer 
A)  cost behavior; resources used 
B)  departments; activities 
C)  fixed costs; variable costs 
D)  product; customer

Question 7

Companies must assign all production costs and only production costs to products for external financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 8

Donna Company makes three types of products.The company has two types of customers.The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations.The following data are available:
$\begin{array}{llll}&\text { Product } 1&\text { Product } 2&\text { Product } 3\
\text { Sales } & \$ 5,000 & \$ 6,000 & \$ 30,000 \
\text { Cost of goods sold } & \underline{4,000} & \underline{4,800} & \underline{15,000} \
\text { Gross margin }&\$1,000&\$1,200&\$15,000
\end{array}$
$\begin{array}{lll}&\text { Customer type }1&\text { Customer type }2\
\text { Product 1 Sales } & \$ 500 & \$ 4,500 \
\text { Product 2 Sales } & \$ 1,000 & \$ 5,000 \
\text { Product 3 Sales } & \$ 16,000 & \$ 14,000 \
\text { Manager visits } & 4 & 16
\end{array}$
What is the operating income for all three products for Customer Type 1?

Accepted Answer

A)  $2,400 
B)  $5,850 
C)  $5,900 
D)  $9,600 
A)  $2,400 
B)  $5,850 
C)  $5,900 
D)  $9,600

Question 9

Designer Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Designer Company plans to produce 40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of ore.Product C sells for $30 per pound and Product U sells for $40 per pound.Assume the company uses the physical-units method of allocating joint costs.What amount of joint costs is allocated to Product U?

Accepted Answer

A)  $0 
B)  $100,000 
C)  $300,000 
D)  $400,000 
A)  $0 
B)  $100,000 
C)  $300,000 
D)  $400,000

Question 10

The use of actual cost rates for allocating variable costs of service departments protects the user departments from inefficiencies in service departments.

Accepted Answer

A) True 
 B)False

Question 11

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Accepted Answer

A)  service departments 
B)  service departments and producing departments 
C)  revenue-producing departments 
D)  revenue-producing products 
A)  service departments 
B)  service departments and producing departments 
C)  revenue-producing departments 
D)  revenue-producing products

Question 12

Customers with a low cost to serve have ________.

Accepted Answer

A)  small order quantities 
B)  many order changes 
C)  large amount of pre-sales support 
D)  small amount of post-sales support 
A)  small order quantities 
B)  many order changes 
C)  large amount of pre-sales support 
D)  small amount of post-sales support

Question 13

Todd Company has two production departments called Assembly and Finishing.The maintenance department serves both production departments.Maintenance costs are allocated based on labor hours.Budgeted fixed costs for the maintenance department are $30,000.Budgeted variable costs for the maintenance department are $5.00 per labor hour.Other relevant data follow:
$$\begin{array} { l l l } 
& \text { Assembly } & \text { Pinishing } \
\text { Capacity available } & 20,000 \text { labor hours } & 15,000 \text { labor hours } \
\text { Capacity used } & 15,000 \text { labor hours } & 9,000 \text { labor hours }
\end{array}$$
Actual maintenance department costs:
$\begin{array}{ll}
\text { Fixed } & \$ 36,000 \
\text { Variable } & \$ 100,000
\end{array}$
The amount of variable maintenance department costs allocated to the Finishing Department should be ________.

Accepted Answer

A)  $37,500 
B)  $42,000 
C)  $45,000 
D)  $75,000 
A)  $37,500 
B)  $42,000 
C)  $45,000 
D)  $75,000

Question 14

The use of cost drivers to allocate central corporate support costs to products such as revenue or total assets represent an " ability to bear" philosophy.

Accepted Answer

A) True 
 B)False

Question 15

If a company chooses to allocate central support costs,it is important to allocate them using ________.

Accepted Answer

A)  actual or estimated usage 
B)  a fair approach accepted by managers 
C)  the indirect costs of each division 
D)  A and B 
A)  actual or estimated usage 
B)  a fair approach accepted by managers 
C)  the indirect costs of each division 
D)  A and B

Question 16

Joint cost allocations should be ignored for decisions such as selling a joint product at the split-off point or processing it further.

Accepted Answer

A) True 
 B)False

Question 17

Joint costs include all inputs of material,labor and overhead that are incurred after the split-off point.

Accepted Answer

A) True 
 B)False

Question 18

Sandy Company manufactures three products from a joint process.Joint costs for the year amounted to $250,000.The following data was available:
$$\begin{array} { l l l } 
\text { Product } & \text { Units Produced } & \text { sales Value at Split-off } \
\hline X& 5,000 & \$ 70,000 \
Y & 3,000 & \$ 30,000 \
Z & 2,000 & \$ 100,000
\end{array}$$
Assume the relative-sales-value method of allocating joint costs is used.What amount of joint costs is allocated to Product Z?

Accepted Answer

A)  $50,000 
B)  $100,000 
C)  $125,000 
D)  $250,000 
A)  $50,000 
B)  $100,000 
C)  $125,000 
D)  $250,000

Question 19

The allocation of fixed costs in service departments to user departments is based on ________.

Accepted Answer

A)  actual capacity used in last period 
B)  budgeted capacity available to user 
C)  actual usage by user department 
D)  actual usage by service department 
A)  actual capacity used in last period 
B)  budgeted capacity available to user 
C)  actual usage by user department 
D)  actual usage by service department

Question 20

By-products differ from joint products because by-products have ________.

Accepted Answer

A)  no joint costs before the split-off point 
B)  joint costs before the split-off point 
C)  significant sales value when compared to other products at the split-off point 
D)  insignificant sales value when compared to other products at the split-off point 
A)  no joint costs before the split-off point 
B)  joint costs before the split-off point 
C)  significant sales value when compared to other products at the split-off point 
D)  insignificant sales value when compared to other products at the split-off point

Under the traditional approach to cost allocation,which of the following steps is NOT used in allocating costs to products?

When allocating fixed costs from service departments to production departments,managers should use instead of .

Two popular methods for allocating service department costs to user departments are the direct method and the step-up method.

The traditional approach to cost allocation focuses on accumulating and reporting costs by .The activity-based approach to cost allocation focuses on accumulating and reporting costs by .

Companies must assign all production costs and only production costs to products for external financial reporting purposes.

The use of actual cost rates for allocating variable costs of service departments protects the user departments from inefficiencies in service departments.

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Customers with a low cost to serve have ________.

The use of cost drivers to allocate central corporate support costs to products such as revenue or total assets represent an " ability to bear" philosophy.

If a company chooses to allocate central support costs,it is important to allocate them using ________.

Joint cost allocations should be ignored for decisions such as selling a joint product at the split-off point or processing it further.

Joint costs include all inputs of material,labor and overhead that are incurred after the split-off point.

The allocation of fixed costs in service departments to user departments is based on ________.

By-products differ from joint products because by-products have ________.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 12: Cost Allocation

Under the traditional approach to cost allocation,which of the following steps is NOT used in allocating costs to products?

When allocating fixed costs from service departments to production departments,managers should use ________ instead of ________.

Two popular methods for allocating service department costs to user departments are the direct method and the step-up method.

The traditional approach to cost allocation focuses on accumulating and reporting costs by ________.The activity-based approach to cost allocation focuses on accumulating and reporting costs by ________.

Companies must assign all production costs and only production costs to products for external financial reporting purposes.

The use of actual cost rates for allocating variable costs of service departments protects the user departments from inefficiencies in service departments.

The phrase "cost application" refers to the allocation of the total departmental costs to ________.

Customers with a low cost to serve have ________.

The use of cost drivers to allocate central corporate support costs to products such as revenue or total assets represent an " ability to bear" philosophy.

If a company chooses to allocate central support costs,it is important to allocate them using ________.

Joint cost allocations should be ignored for decisions such as selling a joint product at the split-off point or processing it further.

Joint costs include all inputs of material,labor and overhead that are incurred after the split-off point.

The allocation of fixed costs in service departments to user departments is based on ________.

By-products differ from joint products because by-products have ________.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

When allocating fixed costs from service departments to production departments,managers should use instead of .

The traditional approach to cost allocation focuses on accumulating and reporting costs by .The activity-based approach to cost allocation focuses on accumulating and reporting costs by .