Question 1

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.

Accepted Answer

A) True 
 B)False

Question 2

Products X,Y,and Z are produced from the same process at a cost of $5,200.Five thousand pounds of raw material yields 1,500 X,2,500 Y,and 1,000 Z.Selling prices are: X $2 per unit,Y $4 per unit,Z valueless.The ending inventory of X is 50 units.What is the value of the ending inventory if joint costs are allocated using net realizable value?

Accepted Answer

A)  $21.67. 
B)  $31.20. 
C)  $40.00. 
D)  $42.00. 
A)  $21.67. 
B)  $31.20. 
C)  $40.00. 
D)  $42.00.

Question 3

Tenet Engineering,Inc.operates two user divisions as separate cost objects.To determine the costs of each division,the company allocates common costs to the divisions.During the past month,the following common costs were incurred: 
$$\begin{array} { | l | r | } 
\hline \text { Computer servic es ( } 85 \% \text { fixed) } & \$ 260,000 \
\hline \text { Building occupancy } & 600,000 \
\hline \text { Personnel costs } & \underline{110,000 }\
\hline \text { Total common costs } & \$ 970,000 \
\hline
\end{array}$$ 
The following information is available concerning various activity measures and service usages by each of the divisions:

$$\begin{array} { | l | r | r | } 
\hline & \text { Dirision } A & \text { Division B } \
\hline \text { Area occupied (square teet) } & 20,000 & 40,000 \
\hline \text { Payroll } & \$ 380,000 & \$ 180,000 \
\hline \text { Computer time (hours) } & 200 & 220 \
\hline \text { Computer storage (megabytes) } & 4,050 & - 0 - \
\hline \text { Equipment value } & \$ 200,000 & \$ 250,000 \
\hline \text { Operating profit (pre-allocations) } & \$ 565,000 & \$ 495,000 \
\hline
\end{array}$$If common computer service costs are allocated using computer time as the allocation basis,what is the computer cost allocated to Division B?

Accepted Answer

A)  $136,190. 
B)  $137,647. 
C)  $144,444. 
D)  $173,333. 
A)  $136,190. 
B)  $137,647. 
C)  $144,444. 
D)  $173,333.

Question 4

The Mallak Company produced three joint products at a joint cost of $100,000.Two of these products were processed further.Production and sales were:
$$\begin{array} { | l | c | r | r | } 
\hline & \text { Veight } & \text { Sales } & \text { Adit. Processing Costs } \
\hline \mathrm { P } & 300,000 \mathrm { ks } . & \$ 245,000 & \$ 200,000 \
\hline \mathrm { Q } & 100,000 \mathrm { ks } . & 30,000 & - 0 \
\hline \mathrm { R } & 100,000 \mathrm { ks } . & 175,000 & 100,000 \
\hline
\end{array}$$ If the estimated net realizable value method is used and product Q is accounted for as a main product,how much of the joint costs would be allocated to product R?

Accepted Answer

A)  $38,889. 
B)  $41,667. 
C)  $50,000. 
D)  $62,500. 
A)  $38,889. 
B)  $41,667. 
C)  $50,000. 
D)  $62,500.

Question 5

Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2.Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: 
 Under the step-method of cost allocation,the amount of costs allocated from S2 to P2 would be:

Accepted Answer

A)  $88,750. 
B)  $50,000. 
C)  $62,500. 
D)  $53,250. 
A)  $88,750. 
B)  $50,000. 
C)  $62,500. 
D)  $53,250.

Question 6

Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2.Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: 
 Under the direct-method of cost allocation,the amount of S1 costs allocated to P1 would be:

Accepted Answer

A)  $20,000. 
B)  $6,000. 
C)  $30,000. 
D)  $62,500. 
A)  $20,000. 
B)  $6,000. 
C)  $30,000. 
D)  $62,500.

Question 7

Describe the difference between the direct method of service department allocation,the step method,and the reciprocal method.

Accepted Answer

The direct method allocates the service

Question 8

Bonanza Co.manufactures products X and Y from a joint process that also yields a by-product,Z.Revenue from sales of Z is treated as a reduction of joint costs.Additional information is as follows: 
 Joint costs were allocated using the net realizable value method at the split-off point.The joint costs allocated to product X were

Accepted Answer

A)  $75,000. 
B)  $100,800. 
C)  $150,000. 
D)  $168,000. 
A)  $75,000. 
B)  $100,800. 
C)  $150,000. 
D)  $168,000.

Question 9

Joint products and by-products are produced simultaneously by a single process or series of processes and:

Accepted Answer

A)  joint products are salable at the split-off point,but by-products are not. 
B)  by-products are salable at the split-off point,but joint products are not. 
C)  the revenue from by-products may be recognized at the time of production. 
D)  all by-products must be allocated some portion of joint costs. 
A)  joint products are salable at the split-off point,but by-products are not. 
B)  by-products are salable at the split-off point,but joint products are not. 
C)  the revenue from by-products may be recognized at the time of production. 
D)  all by-products must be allocated some portion of joint costs.

Question 10

Liberty Credit Checks produces two styles of credit reports: personal and corporate.The difference between the two is the amount of background information and data collection required.The corporate report uses more skilled personnel because additional checking and data are required.The relevant figures for the year just completed follow: Total support service costs to be allocated are $3,200,000.$$\begin{array} { | l | r | r | } 
\hline \text { Allocation base } & \text { Indlvidual } & \text { Corporate } \
\hline \text { Data purchased } & \$ 40,000 & \$ 80,000 \
\hline \text { Research hours } & 24,000 & 30,000 \
\hline \text { Interview hours } & 1,000 & 10,000 \
\hline \text { Number of reports } & 16,000 & 3,000 \
\hline
\end{array}$$Required:
(a)Which method would be preferred by each manager? Which method would be least preferred?
(b)Provide arguments that each manager would make for his/her preferred method.How would each manager argue against his/her least preferred method?

Accepted Answer

(a)This question underscores the arbitr

Question 11

Which of the following statements is true regarding the use of multiple cost-pools?

Accepted Answer

A)  Organizations might implement multiple cost pools when the uses of the service resources have both facility-level and unit-level components. 
B)  Designing and maintaining multiple cost pools is a relatively simple undertaking. 
C)  The benefits of using multiple cost pools always outweigh the costs of setting them up. 
D)  Both resources supplied and resources used are allocated with multiple cost pools. 
A)  Organizations might implement multiple cost pools when the uses of the service resources have both facility-level and unit-level components. 
B)  Designing and maintaining multiple cost pools is a relatively simple undertaking. 
C)  The benefits of using multiple cost pools always outweigh the costs of setting them up. 
D)  Both resources supplied and resources used are allocated with multiple cost pools.

Question 12

The Marketplace Corporation produces two consumer products and a by-product.Zylon is ready for sale after split-off,while Qytol must be further processed.The by-product is a heavy residue in the bottom of the vat.The net realizable value of the by-product is credited against the $565,000 joint cost of the Heating Department.Volume and cost data for February is as follows:$$\begin{array} { | l | r | r | r | } 
\hline & \begin{array} { r } 
\text { Gallons } \
\text { Produced }
\end{array} & \begin{array} { r } 
\text { Selling } \
\text { Price }
\end{array} & \begin{array} { r } 
\text { Additional } \
\text { Processing }
\end{array} \
\hline \text { Zylon } & 200,000 & \$ 2.00 & 0 \
\hline \text { Qytol } & 400,000 & 1.10 & \$ 40,000 \
\hline \text { By-Product } & 5,000 & 0.50 & 0 \
\hline
\end{array}$$ 
Required:
a.Allocate the Heating Department cost to the products using the physical quantities method.b.Allocate the Heating Department cost to the products using the workback method.

Accepted Answer

a.Zylon: $187,500;Qytol: $375,000
b.Zylo

Question 13

The following information relates to Osceola Corporation for the past accounting period. $$\begin{array} { | l | r | } 
\hline & \text { Direct costs } \
\hline \text { Service Dept A } & \$ 80,000 \
\hline \text { Service Dept B } & 60,000 \
\hline \text { Producing Dept C } & 15,000 \
\hline \text { Producing Dept D } & 20,000 \
\hline
\end{array}$$  Using the simultaneous solution method,Department A's cost allocated to Department C is:

Accepted Answer

A)  $48,000. 
B)  $58,800. 
C)  $60,619. 
D)  $98,000. 
A)  $48,000. 
B)  $58,800. 
C)  $60,619. 
D)  $98,000.

Question 14

Criteria for selecting allocation bases for service department allocations should not include:

Accepted Answer

A)  direct,traceable benefits from the service. 
B)  the extent of facilities provided. 
C)  the ease of making an allocation. 
D)  sales dollars generated during the perioD.
Revenues are never a good base for allocating service costs. 
A)  direct,traceable benefits from the service. 
B)  the extent of facilities provided. 
C)  the ease of making an allocation. 
D)  sales dollars generated during the perioD.
Revenues are never a good base for allocating service costs.

Question 15

The step method allocates some,but not all,service department costs to other service departments.

Accepted Answer

A) True 
 B)False

Question 16

Mena Corporation has two production departments,Assembly and Finishing and three service departments,Personnel,Maintenance,and Cafeteria.Data relevant to Mena are: 
Assembly and Finishing work on two jobs during the month: Job 100 and 101.Costs are allocated to jobs based on machine hours in assembly and labor hours in Finishing.The machine and labor hours worked in each department are as follows:
  $$\begin{array} { | l | l | c | c | } 
\hline & & \text { Assembly } & \text { Finishing } \
\hline \text { Job } 100 & \text { Labor Hours } & 200 & 800 \
\hline & \text { Machine Hours } & 1,000 & 200 \
\hline \text { Job } 101 & \text { Labor Hours } & 100 & 900 \
\hline & \text { Machine Hours } & 500 & 100 \
\hline
\end{array}$$Required:
Determine the amount of service department costs to be allocated to Jobs 100 and 101.Mena allocates service department costs to production departments using the direct-method of allocation.

Accepted Answer

First,Allocate the Service Department c

Question 17

Because this allocation method recognizes that service departments often provide each other with inter-departmental service,it is theoretically considered to be the most accurate method for allocating service department costs to production departments.This method is: (CMA adapted)

Accepted Answer

A)  direct method. 
B)  variable method. 
C)  linear method. 
D)  reciprocal methoD.
Reciprocal is considered most accurate because it includes all reciprocal services. 
A)  direct method. 
B)  variable method. 
C)  linear method. 
D)  reciprocal methoD.
Reciprocal is considered most accurate because it includes all reciprocal services.

Question 18

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

Accepted Answer

A)  replacement method. 
B)  physical quantities method. 
C)  net realizable value method. 
D)  units produced methoD.
Under net realizable value,the cost allocated is a constant percentage of the sales value so each product will have the same gross margin percentage. 
A)  replacement method. 
B)  physical quantities method. 
C)  net realizable value method. 
D)  units produced methoD.
Under net realizable value,the cost allocated is a constant percentage of the sales value so each product will have the same gross margin percentage.

Question 19

The direct method makes no cost allocations between or among service departments.

Accepted Answer

A) True 
 B)False

Question 20

Service department costs are:

Accepted Answer

A)  generally treated as period costs rather than product costs. 
B)  reported as selling and administrative expenses on the income statement. 
C)  eventually applied by the user departments to the units produced. 
D)  seldom found in manufacturing organizations. 
A)  generally treated as period costs rather than product costs. 
B)  reported as selling and administrative expenses on the income statement. 
C)  eventually applied by the user departments to the units produced. 
D)  seldom found in manufacturing organizations.

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.

Describe the difference between the direct method of service department allocation,the step method,and the reciprocal method.

Joint products and by-products are produced simultaneously by a single process or series of processes and:

Which of the following statements is true regarding the use of multiple cost-pools?

Criteria for selecting allocation bases for service department allocations should not include:

The step method allocates some,but not all,service department costs to other service departments.

Because this allocation method recognizes that service departments often provide each other with inter-departmental service,it is theoretically considered to be the most accurate method for allocating service department costs to production departments.This method is: (CMA adapted)

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

The direct method makes no cost allocations between or among service departments.

Service department costs are:

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 11: Service Department and Joint Cost Allocation

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.

Describe the difference between the direct method of service department allocation,the step method,and the reciprocal method.

Joint products and by-products are produced simultaneously by a single process or series of processes and:

Which of the following statements is true regarding the use of multiple cost-pools?

The following information relates to Osceola Corporation for the past accounting period. Direct costs Service Dept A \ 80,000 Service Dept B 60,000 Producing Dept C 15,000 Producing Dept D 20,000 Using the simultaneous solution method,Department A's cost allocated to Department C is:

Criteria for selecting allocation bases for service department allocations should not include:

The step method allocates some,but not all,service department costs to other service departments.

Because this allocation method recognizes that service departments often provide each other with inter-departmental service,it is theoretically considered to be the most accurate method for allocating service department costs to production departments.This method is: (CMA adapted)

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

The direct method makes no cost allocations between or among service departments.

Service department costs are:

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters