Exam 7: Allocating Costs of Support Departments and Joint Products

FIGURE 7-5 Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (brochures made) are as follows: -Refer to Figure 7-5. Support department costs NOT allocated to the two brochure centers are

Figure 7-6 Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: -Refer to Figure 7-6. What is the combined total department costs for the producing departments after allocation of the support departments?

The choice of allocation method depends on an evaluation of costs and benefits, and circumstances.

After allocation, total overhead in producing department is divided by the budgeted measure of activity to get the __________ overhead rate.

Figure 7-6 Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: -Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the Maintenance Department allocated to Department P1 is

Laredo Corporation, which manufactures products W, X, Y, and Z through a joint process costing $24,000, has the following data for 2016: What is the amount of joint costs assigned to product W using the physical units method?

A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows: Capacity Provided Capacity Used Department in Hours in Hours Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are Fixed Variable

The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration, personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method? (Round to two decimal places.)

Fixed support department costs should be allocated based on

Rodriguez Manufacturing prices its products at full cost plus 40 percent. The company operates two support departments and two producing departments. Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square feet, and Support Department B's costs are allocated based on number of employees. Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours. One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $45 per unit, and direct labor is $20 per unit. If the sequential method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be (round service allocations to the nearest whole dollar and the costs per unit to two decimal places)

The split-off point can best be defined as

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows: Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided And that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used. The fixed and variable costs allocated to Department XX are Fixed Variable

A company incurred $40,000 of common fixed costs and $60,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows: Capacity Provided Capacity Used Department in Hours in Hours Assume that common fixed costs are to be allocated to Departments A and B on the basis of capacity provided and that common variable costs are to be allocated to Departments A and B on the basis of capacity used. The fixed and variable costs allocated to Department A are Fixed Variable

Allocation is not necessary when using JIT manufacturing.

Activities or variables within a producing department that provoke the incurrence of support costs are called __________ .

FIGURE 7-4 Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: -Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are

Support department fixed costs are allocated on the basis of original capacity.

The charging rate combines variable and fixed costs of support departments.

What is one of the potential disadvantages of NOT allocating support department costs to production departments?

A common cost occurs