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

When using the direct allocation method,a cost accountant would ________.

In certain high-cost defense contracts involving new weapons and equipment,contracts are rarely subject to competitive bidding because ________.

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,what amount of revenue will be allocated to Math Fun in the package that contains all three products? Assume Reading Fun is the primary product,followed by Math Fun,and then Analysis.(Do not round any intermediary calculations. )

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

Tryst University offers only high-tech graduate-level programs.Tryst has two principal operating departments,Engineering and Social Sciences,and two support departments,Facility and Technology Maintenance and Enrollment Services.The base used to allocate facility and technology maintenance is budgeted total maintenance hours.The base used to allocate enrollment services is number of credit hours for a department.The Facility and Technology Maintenance budget is $450,000,while the Enrollment Services budget is $900,000.The following chart summarizes budgeted amounts and allocation-base amounts used by each department: Required: Use the direct method to allocate support costs to each of the two principal operating departments,Engineering and Social Sciences.Prepare a schedule showing the support costs allocated to each department.

Craylon Corp has two service departments,S1 and S2,and two production departments,P1 and P2. The data for April were as follows: Required: a.Set up algebraic equations in linear form for each activity. b.Determine total costs for each department by solving the equations from part (a)using the reciprocal method.

What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?

Which of the following describes who the direct allocation method allocates support-department costs?

The method that allocates costs in each cost pool using the same rate per unit is known as the ________.

When budgeted cost-allocation rates are used,variations in actual usage by one division affect the costs allocated to other divisions.

Under the incremental method,the first incremental user receives the largest allocation of the common costs.

Hanung Corp has two service departments,Maintenance and Personnel.Maintenance Department costs of $310,000 are allocated on the basis of budgeted maintenance-hours.Personnel Department costs of $190,000 are allocated based on the number of employees.The costs of operating departments A and B are $200,000 and $300,000,respectively.Data on budgeted maintenance-hours and number of employees are as follows: Using the direct method,what amount of Maintenance Department costs will be allocated to Department A? (Do not round any intermediary calculations. )

Special cost-allocation problems arise when ________.

Electro Corp sells a refrigerator and a freezer as a single package for $1,000.Other data are in the chart below. Using the stand-alone method with physical units as the weight for revenue allocation,what amount will be allocated to the refrigerator?

Which of the following would be an explicit agreement of reimbursement on a contract?

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 150,000 to 250,000 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 90,000 technician hours.If a dual-rate cost-allocation method is used,what amount of materials laboratory costs will be budgeted for the Large Plane Department?

Under the step-down method,once a support department's costs have been allocated,all subsequent support-department costs are allocated back to it.

Some companies prefer not to allocate production or plant administration costs to jobs,products or customers because these costs are fixed and independent of the level of activity.

Give examples of bundled products for each of the following industries: a.Resort hotel b.Bank c.Restaurant d.Computer store e.Super markets f.Personal care products manufacturer

The Pitt Corporation has been outsourcing data processing in the belief that such outsourcing would reduce costs and increase corporate profitability.In spite of this,there has been no meaningful increase in corporate profitability. Previously,Pitt used a single-rate method to allocate data processing costs.A per unit cost for data processing was computed and compared to the price of the outside supplier.The price of the outside supplier was lower and thus,the outside bid was accepted. Required: Formulate a possible reason why Pitt's profitability has not shown improvement in terms of the cost allocation method used.