Exam 21: Cost Allocation and Performance Measurement

General Chemical produced 10,000 gallons of Breon and 20,000 gallons of Baron. Joint costs incurred in producing the two products totaled $7,500. At the split-off point, Breon has a market value of $6.00 per gallon and Baron $2.00 per gallon. Compute the portion of the joint costs to be allocated to Breon if the value basis is used.

The following data is available for the Cleaning Services Department of Amitol Co. Required: Calculate departmental contribution to overhead for the Cleaning Services Department, including the department's contribution as a percentage of revenues.

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a:

Departmental income statements are prepared for operating as well as service departments.

Briefly describe the process of activity-based costing.

A retail store has three departments, 1, 2, and 3, and does general advertising that benefits all departments. Advertising expense totaled $50,000 for the year, and departmental sales were as follows. Allocate advertising expense to Department 2 based on departmental sales.

An example of a service department is the human resources department.

Activity-based costing can be especially effective in situations where many different products are manufactured in the same department or departments.

What is a profit center?

Breon Beef Company uses the relative market value method of allocating joint costs in its production of beef products. Relevant information for the current period follows: The total joint cost for the current period was $43,000. How much of this cost should Breon Beef allocate to sirloin?

Explain the difference between direct and indirect expenses in accounting for departments.

Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. Salaries allocated to Dept. 1 _______________ Salaries allocated to Dept. 2 _______________

Departmental contribution to overhead is the amount of revenues for that department less its direct expenses.

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts.

Keegan Co. has four departments: purchasing, human resources, manufacturing, and assembly. In a recent month the four departments incurred two shared indirect expenses. The amounts of the indirect expenses and the bases used to allocate them follow. (1) Use this information to allocate each of the two indirect across the four departments using the tables provided below. Departmental data for the company's recent reporting period follow.

Why would a firm use activity-based costing (ABC) rather than traditional two-stage methods of cost allocation for overhead?

Texas Toys, a retail store, has four sales departments supported by three service departments. Cost and operational data for each department follow: Determine the service department expenses to be allocated to Sales Department 1 for: Advertising ___________________ Maintenance __________________ Purchasing ___________________

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Purchasing department expense to be allocated to Fabrication.

Allocating joint costs to products can be based on their relative:

What is the purpose of a responsibility accounting system?