Exam 7: Allocating Costs of Support Departments and Joint Products

Restaurant Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were X - $10,000; Y - $20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit. What amount of joint costs will be allocated to Product X using the physical units method?

Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What is S1's cost equation?

Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. Refer to Figure 7-7. What is the gross profit for Brights assuming the physical units method is used?

The split-off point can best be defined as

The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration, personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method? (Round to two decimal places.)

A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows: Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are

Which of the following would be the most appropriate base for allocating the costs of the maintenance department?

Some support departments typically found in manufacturing and nonmanufacturing organizations are as follows: Cafeteria Personnel Maintenance Purchasing Accounting Required: For each of the preceding support departments, indicate potential bases that could be used to allocate costs to the producing departments.

Describe the differences between the direct, sequential and reciprocal methods of allocating support department costs to production departments.

Which of the following is a by-product?

Figure 7-6 Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: Refer to Figure 7-6. What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?

Allocation increases total costs.

Rodriguez Manufacturing prices its products at full cost plus 40 percent. The company operates two support departments and two producing departments. Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square feet, and Support Department B's costs are allocated based on number of employees. Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours. One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $45 per unit, and direct labor is $20 per unit. If the sequential method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be (round service allocations to the nearest whole dollar and the costs per unit to two decimal places)

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows: Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department XX are

Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. Refer to Figure 7-7. What is the gross profit for Dulls assuming the constant gross margin percentage method is used?

Figure 7-6 Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: Refer to Figure 7-6. Using the direct method, the cost of the Maintenance Department allocated to Department P1 is

Albemarle, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: Normal support department usage is 12,000 hours each for Department X and Department Y. Required:

If a support department's costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department's costs that should be allocated to other departments is

The sequential method allocates costs in ranking order of support departments.