Exam 7: Allocating Costs of Support Departments and Joint Products

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 support departments allocated to Department P1 is

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 2 are

Soy Products produces two products, Soyburgers and Soy steaks, in a single process. In 2016, the joint costs of this process were $36,000. In addition, 20,000 pounds of soyburgers and 10,000 pounds of soy steaks were produced. Separable processing costs beyond the split-off point were: soyburgers, $7,500; soy steaks, $4,500. Soyburgers sells for $2 per pound; Soy steaks sells for $4 per pound. Required: a. Allocate the joint costs using the net realizable value method. b. Allocate the joint costs using the physical units method.

Describe the differences between the direct, sequential and reciprocal methods of allocating support department costs to production departments.

Figure 7-3 Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use 165,000 and 35,000 from the trust area. -Refer to Figure 7-3. Assuming a single charging rate is used, if the Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (Round to the nearest cent.)

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 amount of joint costs allocated to Dulls using the physical units method?

Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?

The cost of crude oil used in producing gasoline products is an example of

Hibernation Company incurred $500,000 to manufacture the following products in a joint process: How much joint cost would be allocated to Product I based on the physical units method?

Support department costs are accounted for in which one of the following ways?

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 a single charging rate, how much will be charged to the West Sales Territory?

Figure 7-1 Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2016 for its three departments: -Refer to Figure 7-1. How much of the indirect advertising costs will be allocated to the Sportswear Department if newspaper ad space is the activity driver?

Producing departments create products and services to make and sell.

Foster Company incurred $200,000 to manufacture the following products in a joint process: How much joint cost would be allocated to Product K based on the total sales value method?

A single changing rate uses the fixed costs of the support department.

Which of the following would be the most appropriate base for allocating the costs of the housekeeping department?

Figure 7-1 Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2016 for its three departments: -Refer to Figure 7-1. How much of the indirect advertising costs will be allocated to the Lingerie Department if direct advertising costs is the activity driver? (Round to the nearest dollar if necessary)

Which of the following is NOT a benefit of the costs of support departments being allocated to production departments?

The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?

McDuff Company uses a job-order costing system to compute product costs. There are two producing departments (P1 and P2) and two support departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor hours, and the production departmental overhead rates are also based on direct labor hours. The following data are available for a recent period: Required: a. Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method. The department with the greatest percentage of interdepartmental services should be allocated first. b. Determine the overhead rates per direct labor hour for P1 and P2. c. Job A2 was completed during the period at a cost of $26,000 for direct materials and direct labor costs. This job required 21 direct labor hours in Department P1 and 15 direct labor hours in Department P2. What was the total cost of Job A2?