Exam 12: Cost Allocation

Salerno Company has two service departments,Maintenance and Cafeteria,as well as two production departments,Mixing and Bottling.Maintenance Department costs are allocated based on square footage and Cafeteria Department costs are allocated based on number of employees.The following data was available: Maintenance Cateteria Mixing Bottling Direct costs \ 200,000 \ 120,000 \ 76,000 \ 85,000 Square footage 1,000 2,000 4,000 6,000 Number of employees 30 20 60 100 Assume the direct method is used to allocate service department costs to producing departments. Required: A) Determine the total costs of the Mixing Department after allocating the service departments' costs. B) Determine the total costs of the Bottling Department after allocating the service departments' costs.

Public relations costs and top management salaries are examples of central corporate support costs.

The ________ method recognizes that some service departments support the activities in other service departments as well as those in production departments.

Sanchez Company has two service departments,Maintenance and Human Resources.Sanchez 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 \ 126,000 \ 84,000 \ 105,000 \ 175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 Assume the step-down method is used to allocate service department costs and the Maintenance Department is allocated first.What are the total costs of the Mixing Department after the allocation of service department costs?

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

A reason for using capacity available instead of capacity used when allocating budgeted fixed costs from service departments to user departments is ________.

Purple Company has three service departments,X,Y and Z and two production departments,P1 and P2.Costs in Departments X and Y are allocated based on square feet and costs in Department Z are allocated based on direct labor hours. The following data are available: Direct costs Square feet occupied Direct labor hours Service Department: X \ 100,000 6,000 13,000 Y \ 225,000 4,000 7,000 Z \ 480,000 2,000 4,000 Producing Department: P1 \ 750,000 10,000 20,000 P2 \ 600,000 6,000 10,000 Assume the direct method of allocating service department costs is used. Required: A) What is the total cost of Producing Department P1 after allocating the service departments' costs? B) What is the total cost of Producing Department P2 after allocating the service departments' costs?

Which of the following statements is FALSE?

For management purposes,managers trace and allocate the costs from value-chain functions to ________.

The direct method of cost allocation is generally preferred because it recognizes the effect of support provided by service departments to other service departments.

Wininger Company has two departments.Relevant information is presented below: Department 1 Department 2 Budgeted gross margin \ 100,000 \ 500,000 Actual gross margin \ 200,000 \ 600,000 Budgeted sales \ 500,000 \ 2,000,000 Actual sales \ 300,000 \ 2,100,000 Corporate management salaries are $3,000,000.The salaries are allocated based on sales using the preferred approach.What amount of salaries is allocated to Department 1?

Activity-based costing systems focus on accumulating costs into key activities instead of departments.

Bambi Company has two departments.Relevant information is presented below: Department 1 Department 2 Budgeted total assets \ 1,000,000 \ 2,000,000 Actual total assets \ 1,200,000 \ 2,300,000 Budgeted sales \ 500,000 \ 2,000,000 Actual sales \ 300,000 \ 2,100,000 Total company-wide advertising costs are $540,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 1?

Joint costs are not allocated to a by-product.

By-products normally have significant sales value in comparison with other jointly-produced products emerging at the split-off point.

The logical cost driver for building rent cost of $10,000 is square feet.The cost object is the assembly department in a factory.

The Computer Department in a large company provides services to many departments.The cost driver for costs in the Computer Department is the number of computer hours.When allocating fixed costs of the Computer Department to a user department such as Department A,which of the following formulas is used?

The Technical Services Department of Georgia State University leased a photocopy machine for $1,500 per month plus $0.04 per copy.Additional budgeted variable operating costs were $0.02 per copy.The Technical Services Department estimated the machine would produce 30,000 copies per month.The Accounting Department estimated it would make 6,000 copies per month but it actually made 5,000 copies.Assume fixed and variable cost pools are allocated separately.What is the amount of variable cost allocated to the Accounting Department for the month?

Michael 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: Direct Number of Number of Number of Product Setups Components Labor Hours Standard 22 8 375 Deluxe 28 12 225 Cost pool Total costs Cost Driver Setup Costs \ 15,000 Number of setups Assembly Costs \3 6,000 Number of components Labor Costs \9 ,000 Number of direct labor hours If activity-based costing is used,the total cost assigned to the deluxe model is ________.

The direct method of allocating service department costs ignores other service departments when allocating service departments' costs to user departments.