Landslide Company has two service departments,Maintenance and Human Resources.Landslide Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: $\begin{array}{lllll}&&\text { Human }\\ &\text { Maintenance } &\text { Resources } & \text { Mixing } & \text { Finishing }\\ \text { Direct costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \\ \text { Square footage } & 800 & 400 & 1,600 & 1,200 \\ \text { Number of employees } & 8 & 12 & 24 & 32 \end{array}$ If the step-down method is used to allocate service department costs,and the Maintenance Department is allocated first,the amount of costs allocated from the Maintenance Department to the Mixing Department is ________.

A) $36,000 B) $42,000 C) $42,750 D) $63,000 A) $36,000 B) $42,000 C) $42,750 D) $63,000

Stevens 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 $40,000.Budgeted variable costs for the maintenance department are $4.00 per labor hour.Other relevant data follow: $\begin{array}{ll}&\text { Assembly }&\text { Finishing }\\ \text { Capacity available }&\text { 18,000 labor hours } & 12,000 \text { labor hour: } \\ \text { Capacity used }&\text { 15,000 labor hours } & 9,000 \text { labor hours } \end{array}$ Actual maintenance department costs: $\begin{array}{ll} \text { Fixed } & \$ 36,000 \\ \text { Variable } & \$ 100,000 \end{array}$ The amount of fixed maintenance department costs allocated to the Assembly Department should be ________.

A) $16,000 B) $22,500 C) $24,000 D) $25,000 A) $16,000 B) $22,500 C) $24,000 D) $25,000

John Company has two service departments,Maintenance and Human Resources.John Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: $\begin{array}{lllll}&&\text { Human }\\ &\text { Maintenance } &\text { Resources } & \text { Mixing } & \text { Finishing }\\ \text { Direct costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \\ \text { Square footage } & 800 & 400 & 1,600 & 1,200 \\ \text { Number of employees } & 8 & 12 & 24 & 32 \end{array}$ If the direct method is used to allocate service department costs,then the total cost of the Mixing Department after allocation would be ________.

A) $36,000 B) $105,000 C) $108,000 D) $213,000 A) $36,000 B) $105,000 C) $108,000 D) $213,000

Bender Company has two service departments,Maintenance and Human Resources.Bender Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: $\begin{array}{llll}&&\text { Human }\\ &\text { Maintenlance }&\text { Resources } & \text { Mixing } & \text { Finishing } \\ \text { Direct costs }& \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\ \text { Square footage }&1,600 & 800 & 3,200 & 2,400 \\ \text { Number of employees }&16 & 24 & 48 & 64 \end{array}$ If the direct method is used to allocate service department costs,then the total cost of the Maintenance Department after the Human Resources Department cost allocation would be ________.

A) $33,600 B) $50,400 C) $54,600 D) $70,000 A) $33,600 B) $50,400 C) $54,600 D) $70,000

Salinas Company has two service departments,Maintenance and Human Resources.Salinas Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: $\begin{array}{lllll}&&\text { Human }\\ \text { Maintenance } & \text { Resources }& \text { Mixing } & \text { Finishing }\\ \text { Direct costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \\ \text { Square footage } & 800 & 100 & 1,300 & 1,100 \\ \text { Number of employees } & 20 & 12 & 28 & 32 \end{array}$ Assume the step-down method is used to allocate service department costs.Which department should be allocated first?

A) Maintenance B) Human Resources C) Mixing D) Finishing A) Maintenance B) Human Resources C) Mixing D) Finishing

Gomez 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: $\begin{array}{llll}&\text { Product } 1&\text { Product } 2&\text { Product } 3\\ \text { Sales } & \$ 5,000 & \$ 6,000 & \$ 30,000 \\ \text { Cost of goods sold } & \underline{4,000} & \underline{4,800} & \underline{15,000} \\ \text { Gross margin }&\$1,000&\$1,200&\$15,000 \end{array}$ $\begin{array}{lll}&\text { Customer type } 1&\text { Customer type } 2\\ \text { Product } 1 \text { Sales } & \$ 500 & \$ 4,500 \\ \text { Product 2 Sales } & \$ 1,000 & \$ 5,000 \\ \text { Product 3 Sales } & \$ 16,000 & \$ 14,000 \\ \text { Manager visits } & 4 & 16 \end{array}$ What is the gross profit margin for all three products for Customer Type 1?

A) $8,000 B) $8,200 C) $8,250 D) $8,300 A) $8,000 B) $8,200 C) $8,250 D) $8,300

Exam 12: Cost Allocation

If a company allocated fixed costs from service departments to user departments based on long-range plans,there is a tendency on the part of managers to underestimate their planned usage.

(True/False)

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(40)

Question 61

Companies must assign all value chain costs to products for internal financial reports.

(True/False)

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Question 62

Examples of service departments in a hospital include the housekeeping and laundry departments.

(True/False)

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(34)

Question 63

Landslide Company has two service departments,Maintenance and Human Resources.Landslide Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: Human Maintenance Resources Mixing Finishing Direct costs \ 126,000 \ 84,000 \ 105,000 \ 175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate service department costs,and the Maintenance Department is allocated first,the amount of costs allocated from the Maintenance Department to the Mixing Department is ________.

(Multiple Choice)

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(36)

Question 64

Stevens 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 $40,000.Budgeted variable costs for the maintenance department are $4.00 per labor hour.Other relevant data follow: Assembly Finishing Capacity available 18,000 labor hours 12,000 labor hour: Capacity used 15,000 labor hours 9,000 labor hours Actual maintenance department costs: Fixed \ 36,000 Variable \ 100,000 The amount of fixed maintenance department costs allocated to the Assembly Department should be ________.

(Multiple Choice)

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Question 65

John Company has two service departments,Maintenance and Human Resources.John Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: Human Maintenance Resources Mixing Finishing Direct costs \ 126,000 \ 84,000 \ 105,000 \ 175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the direct method is used to allocate service department costs,then the total cost of the Mixing Department after allocation would be ________.

(Multiple Choice)

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Question 66

Joint costs of producing multiple products are allocated to ________.

(Multiple Choice)

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(32)

Question 67

If a company allocates costs of central services to products based on sales,________ should be used as the allocation base.

(Multiple Choice)

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Question 68

Two conventional ways of allocating joint costs to products are ________.

(Multiple Choice)

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Question 69

Bender Company has two service departments,Maintenance and Human Resources.Bender Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: Human Maintenlance Resources Mixing Finishing Direct costs \ 50,400 \ 33,600 \ 42,000 \ 70,000 Square footage 1,600 800 3,200 2,400 Number of employees 16 24 48 64 If the direct method is used to allocate service department costs,then the total cost of the Maintenance Department after the Human Resources Department cost allocation would be ________.

(Multiple Choice)

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Question 70

Which of the following departments is NOT a service department?

(Multiple Choice)

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Question 71

Variable costs of service departments are allocated to user departments using cost rates instead of cost rates.

(Multiple Choice)

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(47)

Question 72

Salinas Company has two service departments,Maintenance and Human Resources.Salinas Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year: Human Maintenance Resources Mixing Finishing Direct costs \ 126,000 \ 84,000 \ 105,000 \ 175,000 Square footage 800 100 1,300 1,100 Number of employees 20 12 28 32 Assume the step-down method is used to allocate service department costs.Which department should be allocated first?

(Multiple Choice)

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Question 73

When allocating service department costs to user departments,fixed costs should be allocated using budgeted cost rates times the actual cost driver level.

(True/False)

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(32)

Question 74

To determine the cost of a main product with by-products,we take the cost of the main product and ________.

(Multiple Choice)

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(38)

Question 75

Gomez 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: Product 1 Product 2 Product 3 Sales \ 5,000 \ 6,000 \ 30,000 Cost of goods sold Gross margin \1 ,000 \1 ,200 \1 5,000 Customer type 1 Customer type 2 Product 1 Sales \ 500 \ 4,500 Product 2 Sales \ 1,000 \ 5,000 Product 3 Sales \ 16,000 \ 14,000 Manager visits 4 16 What is the gross profit margin for all three products for Customer Type 1?

(Multiple Choice)

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Question 76

If we account for a product as a by-product,we allocate ________ to it.

(Multiple Choice)

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Question 77

The direct method sequence of allocations begins with the service department that renders the greatest service to the greatest number of other service departments.

(True/False)

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Question 78

Managers trace to service departments.Managers allocate to service departments.

(Multiple Choice)

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Question 79

For external financial reporting,________ costs are assigned to products or services.

(Multiple Choice)

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Question 80

If a company allocated fixed costs from service departments to user departments based on long-range plans,there is a tendency on the part of managers to underestimate their planned usage.

Companies must assign all value chain costs to products for internal financial reports.

Examples of service departments in a hospital include the housekeeping and laundry departments.

Joint costs of producing multiple products are allocated to ________.

If a company allocates costs of central services to products based on sales,________ should be used as the allocation base.

Two conventional ways of allocating joint costs to products are ________.

Which of the following departments is NOT a service department?

Variable costs of service departments are allocated to user departments using cost rates instead of cost rates.

When allocating service department costs to user departments,fixed costs should be allocated using budgeted cost rates times the actual cost driver level.

To determine the cost of a main product with by-products,we take the cost of the main product and ________.

If we account for a product as a by-product,we allocate ________ to it.

The direct method sequence of allocations begins with the service department that renders the greatest service to the greatest number of other service departments.

Managers trace to service departments.Managers allocate to service departments.

For external financial reporting,________ costs are assigned to products or services.

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

If a company allocated fixed costs from service departments to user departments based on long-range plans,there is a tendency on the part of managers to underestimate their planned usage.

Companies must assign all value chain costs to products for internal financial reports.

Examples of service departments in a hospital include the housekeeping and laundry departments.

Joint costs of producing multiple products are allocated to ________.

If a company allocates costs of central services to products based on sales,________ should be used as the allocation base.

Two conventional ways of allocating joint costs to products are ________.

Which of the following departments is NOT a service department?

Variable costs of service departments are allocated to user departments using ________ cost rates instead of ________ cost rates.

When allocating service department costs to user departments,fixed costs should be allocated using budgeted cost rates times the actual cost driver level.

To determine the cost of a main product with by-products,we take the cost of the main product and ________.

If we account for a product as a by-product,we allocate ________ to it.

The direct method sequence of allocations begins with the service department that renders the greatest service to the greatest number of other service departments.

Managers trace ________ to service departments.Managers allocate ________ to service departments.

For external financial reporting,________ costs are assigned to products or services.

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

Variable costs of service departments are allocated to user departments using cost rates instead of cost rates.

Managers trace to service departments.Managers allocate to service departments.