Exam 7: Allocating Costs of Support Departments and Joint Products

Lopez 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)

Maddux Company manufactures products X, Y, and Z in a joint process.The following information is available: Joint product costs are allocated using the sales value at split-off approach. Required:

Figure 7-6 Oaks 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

Compare and contrast the various methods of accounting for joint product costs.

The major objective(s) of allocations are

Which of the following methods allocates support department costs?

The 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.

FIGURE 7-5 Wilson, Inc., operates a copy business at two different locations.Wilson, Inc., has one support department that is responsible for cleaning, service, and maintenance of its copying equipment.The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $400,000.Of this amount, $120,000 is considered a fixed cost.During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (copies made) are as follows: - Refer to Figure 7-5.For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year: - Refer to Figure 7-2.Using a single charging rate, how much will be charged to the West Sales Territory?

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year: - Refer to Figure 7-2.Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.

If the allocation is for product costing, the allocation of variable support department costs would be calculated as

Earl, 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:

A company incurred $40,000 of common fixed costs and $60,000 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

A sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: - What amount of joint costs will be allocated to No.2 common using the constant gross margin percentage method?

Jin Manufacturing prices its products at full cost plus 30 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 $180 per unit, and direct labor is $80 per unit. If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be

_______________ are activities or variables within a producing department that provoke the incurrence of support costs.

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

Morris Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y.The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $4,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: - What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?

Iles Corporation produces four products in a joint process for $500,000.The following information is available on total sales and production in units: What amount of joint costs will be allocated to I based on the physical units method?

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