Question 1

Which of the following departments is not a service department in a typical manufacturing company?

Accepted Answer

A) Assembly. 
B) Accounting. 
C) Human resources. 
D) Information processing. 
A) Assembly. 
B) Accounting. 
C) Human resources. 
D) Information processing.

Question 2

Which of the following statements is false?

Accepted Answer

A) The estimated net realizable value for a product is its estimated selling price after processing the product beyond the split-off point. 
B) In general,it is better to use a product's market value at the split-off point than its estimated net realizable value. 
C) The estimated net realizable value at the split-off point is calculated by taking the sales value after further processing and deducting the additional processing costs. 
D) It is better to use the net realizable value method for allocating joint costs than the estimated net realizable value methoD.It is the final selling price minus the additional processing costs. 
A) The estimated net realizable value for a product is its estimated selling price after processing the product beyond the split-off point. 
B) In general,it is better to use a product's market value at the split-off point than its estimated net realizable value. 
C) The estimated net realizable value at the split-off point is calculated by taking the sales value after further processing and deducting the additional processing costs. 
D) It is better to use the net realizable value method for allocating joint costs than the estimated net realizable value methoD.It is the final selling price minus the additional processing costs.

Question 3

Harry Dishman owns and operates Harry's Septic Service and Legal Advice.Harry's two revenue generating (production)operations are supported by two service departments: Clerical and Janitorial.Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June)are as follows:   Expected costs in the service departments for June are as follows:   Under the step method of allocation,how much Clerical service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar. )

Accepted Answer

A) $12,689. 
B) $13,100. 
C) $13,620. 
D) $15,596. 
A) $12,689. 
B) $13,100. 
C) $13,620. 
D) $15,596.

Question 4

Great Sweets Candy Company produces various types of candies.Several candies could be sold at the split-off point or processed further and sold in a different form after further processing.The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,which are allocated based on pounds produced.Information concerning this process for a recent month appears below:   The net advantage (disadvantage)of processing Sweet Meats further is:

Accepted Answer

A) a $25,000 disadvantage to process further. 
B) a $32,143 advantage to process further. 
C) a $25,000 advantage to process further. 
D) a $282,143 disadvantage to process further. 
A) a $25,000 disadvantage to process further. 
B) a $32,143 advantage to process further. 
C) a $25,000 advantage to process further. 
D) a $282,143 disadvantage to process further.

Question 5

Great Sweets Candy Company produces various types of candies.Several candies could be sold at the split-off point or processed further and sold in a different form after further processing.The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,which are allocated based on pounds produced.Information concerning this process for a recent month appears below:   If Chocolate Delight is processed further,the gross profit margin that will appear in a product line income statement for Chocolate Delight would be:

Accepted Answer

A) $734,286. 
B) $520,000. 
C) $1,020,000. 
D) $632,596. 
A) $734,286. 
B) $520,000. 
C) $1,020,000. 
D) $632,596.

Question 6

One reason to allocate service department costs to user departments is to encourage the user departments to monitor their use of the service department costs.Allocating service department costs makes manufacturing managers aware of the support costs required to complete their manufacturing efforts as well as provide better product costing.

Accepted Answer

A) True 
 B)False

Question 7

Lankip Company produces two main products and a by-product out of a joint process.The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month.Lankip has employed the physical-volume method to allocate joint production costs to the two main products.The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products.Data regarding Lankip's operations for the current month are presented in the chart below.During the month,Lankip incurred joint production costs of $2,520,000.The main products are not marketable at the split-off point and,thus,have to be processed further.   The amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical quantities method to allocate joint production costs would be:

Accepted Answer

A) $1,200,000. 
B) $1,260,000. 
C) $1,500,000. 
D) $1,575,000. 
A) $1,200,000. 
B) $1,260,000. 
C) $1,500,000. 
D) $1,575,000.

Question 8

In a sell-or-process-further decision,the additional costs incurred after the split-off point are irrelevant.These additional costs are incremental and would be relevant.

Accepted Answer

A) True 
 B)False

Question 9

The Moody Company produced three joint products at a joint cost of $100,000.Two of these products were processed further.Production and sales were:   If joint costs are allocated based on relative weight of the outputs and all products are main products,how much of the joint costs would be allocated to product P?

Accepted Answer

A) $43,750. 
B) $50,000. 
C) $60,000. 
D) $62,500. 
A) $43,750. 
B) $50,000. 
C) $60,000. 
D) $62,500.

Question 10

The direct method makes no cost allocations between or among service departments.All costs are allocated directly to the producing departments,as if service departments were not a user of services themselves.

Accepted Answer

A) True 
 B)False

Question 11

Joint costs are processing costs incurred after the split-off point in a common production process.Joint costs are the costs that are incurred prior to reaching the split-off point.

Accepted Answer

A) True 
 B)False

Question 12

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method.Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Reality Company.   Use of services by other departments is as follows.   The equation for department S3 (supervision)is:

Accepted Answer

A) S3 = $45,000 + .90S1 + .10S2. 
B) S3 = $45,000 + .10S1. 
C) S3 = $45,000 + 1.00S1. 
D) S3 = .10S1. 
A) S3 = $45,000 + .90S1 + .10S2. 
B) S3 = $45,000 + .10S1. 
C) S3 = $45,000 + 1.00S1. 
D) S3 = .10S1.

Question 13

The Moody Company produced three joint products at a joint cost of $100,000.Two of these products were processed further.Production and sales were:   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 14

For purposes of allocating joint costs to joint products,the estimated net realizable value at split-off is equal to:

Accepted Answer

A) final sales price reduced by cost to complete after split-off. 
B) sales price less a normal profit margin at the point of sale. 
C) separable product cost plus a normal profit margin. 
D) total sales value less joint costs at point of split-off. 
A) final sales price reduced by cost to complete after split-off. 
B) sales price less a normal profit margin at the point of sale. 
C) separable product cost plus a normal profit margin. 
D) total sales value less joint costs at point of split-off.

Question 15

The physical quantities method of allocating joint costs is often used when the output sales prices are highly volatile.In this instance,there would not be reliable sales values;physical values would be preferred.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a physical measure that can be used for allocating joint costs using the physical quantities method?

Accepted Answer

A) Tons of steel. 
B) Ounces of gold. 
C) Dollars of labor. 
D) Feet of lumber. 
A) Tons of steel. 
B) Ounces of gold. 
C) Dollars of labor. 
D) Feet of lumber.

Question 17

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.Common costs will be there whatever the end decision is.

Accepted Answer

A) True 
 B)False

Question 18

Computer Complex,Inc.has two main services: (1)time on a timeshared computer system,and (2)proprietary computer programs.Computer time is provided by the operation department (Op)and programs are written by the programming department (P) The percentage of each service used by each department for a typical period is:   In a typical period,the operation department (Op)spends $4,500 and the programming department (P)spends $2,500.Under the reciprocal method what is the algebraic solution to the cost allocation problem?

Accepted Answer

A) Op = 4,500 + .40 P;P = 2,500 + .30 Op. 
B) Op = 4,500 + .70 P;P = 2,500 + .60 Op. 
C) Op = 2,500 + .40 P;P = 4,500 + .30 Op. 
D) Op = 2,500 + .70 P;P = 4,500 + .60 Op. 
A) Op = 4,500 + .40 P;P = 2,500 + .30 Op. 
B) Op = 4,500 + .70 P;P = 2,500 + .60 Op. 
C) Op = 2,500 + .40 P;P = 4,500 + .30 Op. 
D) Op = 2,500 + .70 P;P = 4,500 + .60 Op.

Question 19

Harry Dishman owns and operates Harry's Septic Service and Legal Advice.Harry's two revenue generating (production)operations are supported by two service departments: Clerical and Janitorial.Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June)are as follows:   Expected costs in the service departments for June are as follows:   Under the direct method of allocation,what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar. )

Accepted Answer

A) $6,231. 
B) $7,720. 
C) $8,640. 
D) $9,330. 
A) $6,231. 
B) $7,720. 
C) $8,640. 
D) $9,330.

Question 20

The Freed Company produces three products,X,Y,and Z from a single raw material input.Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000.Product Y:

Accepted Answer

A) should be sold at the split-off point,rather than processed further. 
B) would increase the company's overall net income by $18,000 if processed further and then sold. 
C) would increase the company's overall net income by $68,000 if processed further and then sold. 
D) would increase the company's overall net income by $2,000 if processed further and then solD.Process further: $68,000 - 16,000 = $52,000 vs.$50,000 sell now 
A) should be sold at the split-off point,rather than processed further. 
B) would increase the company's overall net income by $18,000 if processed further and then sold. 
C) would increase the company's overall net income by $68,000 if processed further and then sold. 
D) would increase the company's overall net income by $2,000 if processed further and then solD.Process further: $68,000 - 16,000 = $52,000 vs.$50,000 sell now

Which of the following departments is not a service department in a typical manufacturing company?

Which of the following statements is false?

In a sell-or-process-further decision,the additional costs incurred after the split-off point are irrelevant.These additional costs are incremental and would be relevant.

The direct method makes no cost allocations between or among service departments.All costs are allocated directly to the producing departments,as if service departments were not a user of services themselves.

Joint costs are processing costs incurred after the split-off point in a common production process.Joint costs are the costs that are incurred prior to reaching the split-off point.

For purposes of allocating joint costs to joint products,the estimated net realizable value at split-off is equal to:

The physical quantities method of allocating joint costs is often used when the output sales prices are highly volatile.In this instance,there would not be reliable sales values;physical values would be preferred.

Which of the following is not a physical measure that can be used for allocating joint costs using the physical quantities method?

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.Common costs will be there whatever the end decision is.

The Freed Company produces three products,X,Y,and Z from a single raw material input.Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000.Product Y:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

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

Which of the following departments is not a service department in a typical manufacturing company?

Which of the following statements is false?

In a sell-or-process-further decision,the additional costs incurred after the split-off point are irrelevant.These additional costs are incremental and would be relevant.

The direct method makes no cost allocations between or among service departments.All costs are allocated directly to the producing departments,as if service departments were not a user of services themselves.

Joint costs are processing costs incurred after the split-off point in a common production process.Joint costs are the costs that are incurred prior to reaching the split-off point.

For purposes of allocating joint costs to joint products,the estimated net realizable value at split-off is equal to:

The physical quantities method of allocating joint costs is often used when the output sales prices are highly volatile.In this instance,there would not be reliable sales values;physical values would be preferred.

Which of the following is not a physical measure that can be used for allocating joint costs using the physical quantities method?

In a sell-or-process-further decision,the common costs incurred prior to the spilt-off point are irrelevant.Common costs will be there whatever the end decision is.

The Freed Company produces three products,X,Y,and Z from a single raw material input.Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000.Product Y:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

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