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

The dual cost-allocation method classifies costs into two pools,a budgeted cost pool and an actual cost pool.

Because the variable costs are directly and causally linked to usage,charging them as a function of the actual usage is appropriate.

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 single-rate cost-allocation method is used,what is the allocation rate per hour used? (Round the final answer to the nearest dollar. )

When budgeted cost-allocations rates are used ________.

The price of a bundled product is typically more than the sum of the prices of the individual products sold separately.

Buildz Corp has been servicing the Production Casting Department for five years.Beginning next year,the company is adding a Production Molding Department to compliment the materials produced by the Production Casting Department.As a result,data center costs are expected to increase from $800,000 per year to $1,000,000 per year.The Production Molding Department will use 20% of the data center efforts. Required: a.Using the stand-alone cost-allocation method,identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year. b.Using the incremental cost-allocation method,identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.

The Alex Miller Corporation operates one central plant that has two divisions,the Flashlight Division and the Night Light Division.The following data apply to the coming budget year: Budgeted costs of the operating the plant for 10,000 to 20,000 hours: Budgeted long-run usage per year: Assume that practical capacity is used to calculate the allocation rates.Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June. Required: a.If a single-rate cost-allocation method is used,what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? b.For the month of June,if a single-rate cost-allocation method is used,what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs. c.If a dual-rate cost-allocation method is used,what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? d.For the month of June,if a dual-rate cost-allocation method is used,what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

When budgeted fixed costs are allocated based on actual usage,user departments will not know their fixed-cost allocations until the end of the budget period.

Under which allocation method are one-way reciprocal support services recognized?

Two or more support departments whose costs are being allocated can also provide support to each other and as well as to operating departments.