Question 1

What is the final step for allocating service department costs to production departments?

Accepted Answer

A) Assign overhead costs that are directly attributable to a service or production department. 
B) Allocate other overhead costs (that are not directly attributable to a service or production department)based on some cost driver. 
C) Allocate service department costs to production departments 
D) Service department costs cannot be allocated to production departments. 
A) Assign overhead costs that are directly attributable to a service or production department. 
B) Allocate other overhead costs (that are not directly attributable to a service or production department)based on some cost driver. 
C) Allocate service department costs to production departments 
D) Service department costs cannot be allocated to production departments.

Question 2

What costs result from the joint use of a facility or a service by several products,departments,or process?

Accepted Answer

A) Opportunity 
B) Direct 
C) Common (or indirect)costs 
D) All of the answers are correct. 
A) Opportunity 
B) Direct 
C) Common (or indirect)costs 
D) All of the answers are correct.

Question 3

Why do companies allocate joint-process costs?

Accepted Answer

A) Performance evaluation 
B) Reporting purposes 
C) Establishing regulated rates 
D) All of the answers are correct. 
A) Performance evaluation 
B) Reporting purposes 
C) Establishing regulated rates 
D) All of the answers are correct.

Question 4

When are cost allocation concepts appropriate?

Accepted Answer

A) only as management deems appropriate. 
B) in manufacturing,nonmanufacturing,and service organizations. 
C) in allocating costs to production departments,but not from one service department to another. 
D) None of the answers is correct. 
A) only as management deems appropriate. 
B) in manufacturing,nonmanufacturing,and service organizations. 
C) in allocating costs to production departments,but not from one service department to another. 
D) None of the answers is correct.

Question 5

Why are the costs of operating service departments allocated to other departments?

Accepted Answer

A) Many departments consume the services provided by service departments and should be assigned a share of the costs associated with the services consumed. 
B) Allocating service costs to other departments for services provided gives department managers incentives to control the use of support services. 
C) External reporting regulations (for tax and financial reporting)require allocating manufacturing overhead to the units produced. 
D) All of the answers are correct. 
A) Many departments consume the services provided by service departments and should be assigned a share of the costs associated with the services consumed. 
B) Allocating service costs to other departments for services provided gives department managers incentives to control the use of support services. 
C) External reporting regulations (for tax and financial reporting)require allocating manufacturing overhead to the units produced. 
D) All of the answers are correct.

Question 6

Useful Tool Company
Useful Tool Company has two service departments (General Factory and Repair)and two operating departments (Fabrication and Assembly).Management has decided to allocate repair costs on the basis of the area (square feet)in each department and to allocate General Factory on the basis of labor hours worked by the employees in each of their respective departments.
The following data appear in the company records for the current period:
   
The company allocates the costs from the General Factory Department first.
Refer to the Useful Tool Company.Using machine hours as the base and the step method of allocation,what is the overhead rate for the Fabrication Department?

Accepted Answer

(a)& (b)

Question 7

Why are joint-process costs are allocated?

Accepted Answer

A) Due to the need to assign joint-process costs to two or more products manufactured from a common input. 
B) Due to the need to assign joint-process costs to two or more products manufactured from different inputs. 
C) Due to the need to assign joint-process costs to two or more products manufactured from a common output. 
D) Due to the need to assign joint-process costs to two or more products manufactured from different outputs. 
A) Due to the need to assign joint-process costs to two or more products manufactured from a common input. 
B) Due to the need to assign joint-process costs to two or more products manufactured from different inputs. 
C) Due to the need to assign joint-process costs to two or more products manufactured from a common output. 
D) Due to the need to assign joint-process costs to two or more products manufactured from different outputs.

Question 8

Describe the factors that should be considered in allocating service department costs.

Accepted Answer

Service department costs should be alloc

Question 9

Which of the following statements is true concerning finding a cost-allocation base for activity-based costing?

Accepted Answer

A) Finding the cost-allocation base is justified if the benefits from improved decisions exceed the costs of finding and using the base. 
B) Finding the cost-allocation base is usually difficult and costly. 
C) Finding the cost-allocation base may require the accumulation of extensive data in addition to the regular accounting information. 
D) All of the answers are correct. 
A) Finding the cost-allocation base is justified if the benefits from improved decisions exceed the costs of finding and using the base. 
B) Finding the cost-allocation base is usually difficult and costly. 
C) Finding the cost-allocation base may require the accumulation of extensive data in addition to the regular accounting information. 
D) All of the answers are correct.

Question 10

Big Sky Timber processes timber into Grade A and Grade B lumber.Timber costs $400 per unit,where one unit equals 1,000 board feet.The process involves cutting timber into the two grades of lumber.Each unit of timber produces .25 unit (250 board feet)of Grade A lumber with a market value of $560 and .75 unit (750 board feet)of Grade B with a market value of $240.The joint cost of the production process is $100 per unit.
Required:
a.Assume that the joint costs of the two grades of lumber are to be allocated on the basis of units of output.What cost is assigned to each product (for .25 unit of Grade A and .75 unit of Grade B)?
b.If the joint costs are allocated on the basis of the net realizable value,what cost is assigned to each product? How much profit or loss does the Grade A lumber earn? Is it really possible to determine which product is more profitable? Explain why or why not.
Joint cost = $500 (= $400 cost of timber + $100 joint process costs).

Accepted Answer

a.Allocation on the Basis of Units of Ou

Question 11

How do common costs arise?

Accepted Answer

A) From the joint use of a facility or a service by several products,departments,or processes. 
B) From the direct use of a facility or a service by several products,departments,or processes. 
C) From the variable use of a facility or a service by several products,departments,or processes. 
D) From the marginal use of a facility or a service by several products,departments,or processes. 
A) From the joint use of a facility or a service by several products,departments,or processes. 
B) From the direct use of a facility or a service by several products,departments,or processes. 
C) From the variable use of a facility or a service by several products,departments,or processes. 
D) From the marginal use of a facility or a service by several products,departments,or processes.

Question 12

Stephanie Company
Stephanie Company has two production departments: D and J.Stephanie also has 3 service departments: Personnel,Administration,and Shipping.Shipping costs are allocated on the basis of number of packages,while Personnel and Administration costs are allocated using number of employees.Assume that the ranking of the benefits provided is in the order listed below.
 
Refer to Stephanie Company.Using the direct method,what amount of Administration costs is allocated to Department J (rounded to the nearest $)?

Accepted Answer

A) $ 97,561 
B) $320,000 
C) $400,000 
D) $480,000 
A) $ 97,561 
B) $320,000 
C) $400,000 
D) $480,000

Question 13

Why do companies allocate common costs to departments and products?

Accepted Answer

A) pricing and bidding. 
B) contract cost reimbursement. 
C) motivation. 
D) All of the answers are correct. 
A) pricing and bidding. 
B) contract cost reimbursement. 
C) motivation. 
D) All of the answers are correct.

Question 14

Which overhead allocation method allocates service department costs with consideration of services rendered to other service departments?

Accepted Answer

A) step method. 
B) direct method. 
C) net realizable value method. 
D) physical measures method. 
A) step method. 
B) direct method. 
C) net realizable value method. 
D) physical measures method.

Question 15

The stage of processing when two or more products are separated from the processing of a common input in the forest products,oil and gas,chemicals and mining industries is called a

Accepted Answer

A) point of no return. 
B) separation point. 
C) splitoff point. 
D) breakout point. 
A) point of no return. 
B) separation point. 
C) splitoff point. 
D) breakout point.

Question 16

Grimes Company processes a chemical,Techno 9,through a pressure treatment operation.The complete process has two outputs,Y and Z.The January costs to process Techno 9 are $75,000 for materials and $90,000 for conversion costs.This processing results in two outputs,Y and Z,that sell for a total of $332,000.The sales revenue from Y amounts to $200,000 of the total.
Required:
Using the net realizable method,assign costs to Y and Z for January.
Total joint costs are $165,000 (based on the $75,000 materials plus $90,000 conversion).These costs are allocated as follows:

Accepted Answer

To Output Y:
$200,000/$332,000

Question 17

While the results of allocating joint-process costs in different ways can be very important to managers for planning,performance evaluation,and decision making,

Accepted Answer

A) there is no precise way of tracing joint-process costs to joint products. 
B) activity-based costing provides a precise way of tracing joint-process costs to joint products. 
C) traditional costing provides a precise way of tracing joint-process costs to joint products. 
D) standard costing provides a precise way of tracing joint-process costs to joint products. 
A) there is no precise way of tracing joint-process costs to joint products. 
B) activity-based costing provides a precise way of tracing joint-process costs to joint products. 
C) traditional costing provides a precise way of tracing joint-process costs to joint products. 
D) standard costing provides a precise way of tracing joint-process costs to joint products.

Question 18

The method of allocating joint costs used when product prices are not set by the market (for example with heavily regulated companies)is called the

Accepted Answer

A) absolute quantities method. 
B) physical qualities method. 
C) physical quantities method. 
D) regulation method. 
A) absolute quantities method. 
B) physical qualities method. 
C) physical quantities method. 
D) regulation method.

Question 19

The methodology(ies)of allocating joint-process costs is(are)based on

Accepted Answer

A) net realizable value,only. 
B) physical measures,only. 
C) both net realizable value and physical measures. 
D) None of the answers is correct. 
A) net realizable value,only. 
B) physical measures,only. 
C) both net realizable value and physical measures. 
D) None of the answers is correct.

Question 20

How are service department costs allocated to production departments?

Accepted Answer

First,assign overhead costs that are dir

What is the final step for allocating service department costs to production departments?

What costs result from the joint use of a facility or a service by several products,departments,or process?

Why do companies allocate joint-process costs?

When are cost allocation concepts appropriate?

Why are the costs of operating service departments allocated to other departments?

Why are joint-process costs are allocated?

Describe the factors that should be considered in allocating service department costs.

Which of the following statements is true concerning finding a cost-allocation base for activity-based costing?

How do common costs arise?

Why do companies allocate common costs to departments and products?

Which overhead allocation method allocates service department costs with consideration of services rendered to other service departments?

The stage of processing when two or more products are separated from the processing of a common input in the forest products,oil and gas,chemicals and mining industries is called a

While the results of allocating joint-process costs in different ways can be very important to managers for planning,performance evaluation,and decision making,

The method of allocating joint costs used when product prices are not set by the market (for example with heavily regulated companies)is called the

The methodology(ies)of allocating joint-process costs is(are)based on

How are service department costs allocated to production departments?

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Filters

Exam 13: Allocating Costs to Responsibility Centers

What is the final step for allocating service department costs to production departments?

What costs result from the joint use of a facility or a service by several products,departments,or process?

Why do companies allocate joint-process costs?

When are cost allocation concepts appropriate?

Why are the costs of operating service departments allocated to other departments?

Why are joint-process costs are allocated?

Describe the factors that should be considered in allocating service department costs.

Which of the following statements is true concerning finding a cost-allocation base for activity-based costing?

How do common costs arise?

Why do companies allocate common costs to departments and products?

Which overhead allocation method allocates service department costs with consideration of services rendered to other service departments?

The stage of processing when two or more products are separated from the processing of a common input in the forest products,oil and gas,chemicals and mining industries is called a

While the results of allocating joint-process costs in different ways can be very important to managers for planning,performance evaluation,and decision making,

The method of allocating joint costs used when product prices are not set by the market (for example with heavily regulated companies)is called the

The methodology(ies)of allocating joint-process costs is(are)based on

How are service department costs allocated to production departments?

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Filters