Exam 17: Allocation of Support Activity Costs and Joint Costs

Eastside Hospital has two service departments (Patient Records and Accounting) and two "production" departments (Internal Medicine and Surgery). Which of the following allocations would likely take place under the reciprocal-services method of cost allocation?

Under dual-cost allocation, fixed costs are allocated on the basis of a user department's:

Which of the following methods fully recognizes the fact that some service departments provide service to other service departments?

Isthmus Corporation uses the physical-units method to allocate costs among its three joint products: X, Y, and Z. The following data are available for the period just ended: Joint processing cost: $800,000 Total production: 150,000 pounds Share of joint cost allocated to X: $160,000 Share of joint cost allocated to Y: $400,000 Which of the following statements is true?

When allocating service department costs, companies should use actual costs rather than budgeted costs, and separate rates for variable and fixed costs.

Seymore Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows. Cafeteria 20 Human Resources 30 Machining 100 Assembly 150 Seymore uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Cafeteria?

The Dollar Store has a Human Resources Department and a Janitorial Department that provide service to three sales departments. The Human Resources Department cost is allocated on the basis of employees, and the Janitorial Department cost is allocated on the basis of space. The following information is available: Budgeted cost Space in square feet Number of employees Human \ 45,000 4,000 5 \ 30,000 1,000 10 20,000 15 30,000 45 50,000 30 Using the step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is:

Seymore Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows. Cafeteria 20 Human Resources 30 Machining 100 Assembly 150 Seymore uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Assembly?

Which of the following methods recognizes some (but not all) of the services that occur between service departments?

Which of the following statements about joint-cost allocation is false?

Which of the following methods accounts for 100% of the services that occur between service departments?

Hreck, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows. Human Resources 7,000 Building Maintenance 11,000 Machining 20,000 Assembly 28,000 Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

Garage Specialty Corporation manufactures joint products P and Q. During a recent period, joint costs amounted to $80,000 in the production of 20,000 gallons of P and 60,000 gallons of Q. Garage can sell P and Q at split-off for $2.20 per gallon and $2.60 per gallon, respectively. Alternatively, both products can be processed beyond the split-off point, as follows: Separable processing costs \ 15,000 \ 35,000 Sales price (per gallon) if processed beyond split-off \3 \4 The joint cost allocated to Q under the relative-sales-value method would be:

The direct method ignores the fact that some service departments provide service to other service departments.

Harvest Corporation has two service departments (S1 and S2) and two production departments (P1 and P2), and uses the step-down method of cost allocation. Management has determined that S1 provides more service to the firm than S2, and has decided that the number of employees is the best allocation base to use for S1. The following data are available: Number of Department Employees S1 10 S2 20 P1 50 P2 70 Which of the following statements is (are) true if S1 and S2 have respective operating costs of $280,000 and $350,000?

Garage Specialty Corporation manufactures joint products P and Q. During a recent period, joint costs amounted to $80,000 in the production of 20,000 gallons of P and 60,000 gallons of Q. Garage can sell P and Q at split-off for $2.20 per gallon and $2.60 per gallon, respectively. Alternatively, both products can be processed beyond the split-off point, as follows: Separable processing costs \ 15,000 \ 35,000 Sales price (per gallon) if processed beyond split-off \3 \4 The joint cost allocated to P under the relative-sales-value method would be:

Rocky Mountain Company produces two products (X and Y) from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Joint manufacturing costs for the year were $60,000. Sales values and costs were as follows: Units 9,000 6,000 Sales Value \ 40,000 80,000 If Processed Further Sales Separable \ 78,000 \ 10,500 90,000 7,500 If the joint production costs are allocated based on the net-realizable-value method, the amount of joint cost assigned to product Y would be:

Which of the following would not be considered a service department in a hospital?

The Montrose Clinic has two service departments (Human Resources and Information Resources) and two "production" departments (In-patient Treatment and Out-patient Treatment). The service departments service the "production" departments as well as each other, and studies have shown that Information Resources provides the greater amount of service. Which of the following allocations would occur if Montrose uses the direct method of cost allocation?

Detroit Electronics, Inc. manufactures gauges for automobile dashboards. The company has two production departments, Molding and Assembly. There are three service departments: Human Resources, Maintenance, and Engineering. Usage of services by the various departments follows. Human Resources Maintenance Engineering Molding Assembly Human -- 5\% 5\% 40\% 50\% -- -- 10\% 40\% 50\% -- -- -- 75\% 25\% The budgeted costs in Detroit's service departments are: Human Resources, $180,000; Maintenance, $270,000; and Engineering, $200,000. The company rounds all calculations to the nearest dollar. Required: A. Use the direct method to allocate Detroit's service department costs to the production departments. B. Determine the proper departmental sequence to use in allocating the company's service costs by the step-down method. C. Ignoring your answer in part "B," assume that Human Resources costs are allocated first, Maintenance costs second, and Engineering costs third. Use the step-down method to allocate Detroit's service department costs.