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

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 300,000 to 500,000 copies: Budgeted long-run usage in copies per year: Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 70,000 copies and by the Operations Department was 330,000 copies.If a single-rate cost-allocation method is used,what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs.(Do not round interim calculations and round the final calculation to the nearest dollar. )

Revenue allocation based on the number of physical units is only appropriate when individual products in the bundle are of equal value.

Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services.

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

The reciprocal allocation method ________.

Hugo,owner of Automated Fabric,Inc. ,is interested in using the reciprocal allocation method.The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Services furnished: By Maintenance (budgeted labor-hours): By Personnel (Number of employees serviced): What is the complete reciprocated cost of the Maintenance Department? (Do not round any intermediary calculations. )

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: Budgeted long-run usage in hours per year: 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 80,000 technician hours.If a dual-rate cost-allocation method is used,what amount of materials laboratory costs will be budgeted for the Small Plane Department?

The stand-alone method of allocating determines the weights for cost allocation by considering each user of the cost as a separate entity.

In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.

Complete reciprocated costs is the support department's own costs plus any interdepartmental cost allocations.

Which of the following would be considered the biggest advantage of using practical capacity to allocate costs?

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

There is uncertainty in defense contracts about the final cost to produce a new weapon or equipment.Explain.

Jonathan has managed a downtown store in a major metropolitan city for several years.The firm has ten stores in varying locations.In the past,senior management noticed Jonathan's work and he has received very good annual evaluations for his management of the store. This year his store has generated steady growth in sales,but earnings have been deteriorating.After examining the monthly performance report generated by the company budgeting department,he noticed that increasing fixed costs is causing the decrease in earnings. Administrative corporate costs,primarily fixed costs,are allocated to individual stores each month based on actual sales for that month.Two of these stores are currently growing at a rapid pace,while four other stores are having operating difficulties. Required: From the information presented,what do you think is the cause of Jonathan's reported decrease in earnings? How can this be corrected?

When using the dual-rate method,the fixed cost allocation is based on ________.

Which of the following describes reciprocal support?

The stand-alone method uses the product in the bundle with the most sale and then uses this ranking to allocate bundled revenues to individual products.

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle.

The direct allocation method provides key information for outsourcing decisions regarding support services.

Buzz's Educational Software Outlet sells two or more of the video games as a single package.Managers are keenly interested in individual product-profitability figures.Information pertaining to three bundled products and the stand-alone prices is as follows: Using the incremental method for revenue allocation,what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product,followed by Math Fun,and then Analysis.(Do not round any intermediary calculations. )