Exam 7: Allocating Costs of Support Departments and Joint Products

The following information pertains to Amon Schrock Corporation: Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

Joint costs are allocated because of

Examples of producing departments include all of the following EXCEPT

Figure 7-2 Long Distance Company's travel department had the following budgeted costs for the coming year: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips -Refer to Figure 7-2. Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.

Which of the following allocation methods assumes "step­down" interdepartmental services?

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

Some support departments typically found in manufacturing and nonmanufacturing organizations are as follows: Cafeteria Personnel Maintenance Purchasing Accounting Required: For each of the preceding support departments, indicate potential bases that could be used to allocate costs to the producing departments.

Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. -Refer to Figure 7-7. What is the gross profit for Dulls assuming the constant gross margin percentage method is used?

Algonquin Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were: X-$10,000; Y-$20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit. What amount of joint costs will be allocated to product X using the net realizable value net realizable value method?

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. For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are

The overhead rate may be computed once allocation from support service cost to producing department has been performed.

Julius Manufacturing prices its products at full cost plus 30 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 $180 per unit, and direct labor is $80 per unit. If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be

Chrome Enterprises has two support departments (S1 and S2) and two producing (A and B). The distribution of services by the support departments is as follows: Total department costs for the support and producing departments are as follows: Find the amount of total costs for A and B using the reciprocal method.

The following information pertains to Longboat Company: Longboat Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round amounts to dollars.) If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

Algonquin Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were X-$10,000; Y-$20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit. What is the gross profit of product Y assuming the net realizable value method is used?

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 both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs Allocated to Department XX are Fixed Variable

The use of a multiple charging rate is needed, one for variable costs, and one for fixed costs.

Diane's Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method? a. $15,000 b. $27,250 c. $25,000 d. $17,250

A joint cost allocation method that would assign the same amount of cost per unit to two joint products that sell for $10 and $40, respectively, is the

The split-off point is the ending point of a joint product process.