Exam 7: Allocating Costs of Support Departments and Joint Products

Abound Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What are the total costs to be allocated from Department S2?

Support department cost to the producing departments is(are) called:

Eagle Company applies factory overhead in its two producing departments using a predetermined rate based on budgeted machine hours in the Blending Department and based on budgeted labor hours in the Containerizing Department. Variable cafeteria costs are allocated to the producing departments based on budgeted number of employees, and fixed costs are allocated based on the capacity number of employees. Variable maintenance costs are allocated on the budgeted number of direct labor hours, and fixed costs are allocated on labor hour capacity. The data concerning next year's operations are as follows: Support Departments Producing Departments Required: a. Prepare a schedule showing the allocation of budgeted support department costs to producing departments. b. Determine the predetermined overhead rate for the producing departments.

Producing departments provide essential services for support departments.

Cumadin Corporation, which manufactures products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2016: What is the amount of joint costs assigned to Product X using the sales-value-at-split-off method?

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 are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

Joint products are two or more products produced simultaneously by the same process.

Which of the following is NOT a major objective of allocation as identified by the IMA?

The following information pertains to Famous Company: Famous 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. What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Which of the following methods allocates a joint cost such that each product has the same cost of goods sold percentage?

Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What is S1's cost equation?

Hotchkiss Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows: Maint. Dept. Person. Dept. Dept. P1 Dept. P2 Standard service hours used 400 200 1,200 600 Number of employees 20 40 180 180 Direct labor hours 200 200 1,000 1,000 What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

A secondary product recovered during the manufacturing of a primary product during a joint process is called a(n): __________ .

The weight factor addresses the advantages of the physical units method.

What is the most likely action to be taken by a company when a support department is NOT as cost effective as an outside source?

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?

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. For purposes of performance evaluation, fixed costs allocated to Brochure Center 2 are

Saturn Company manufactures products X, Y, and Z in a joint process. The following information is available: Joint product costs are allocated using the sales value at split-off approach. Required: a. What is the sales-value-at-split-off for Product X? b. What is the amount of joint costs allocated to Product Y using the sales-value-at-split-off method? c. If the company used the physical units method to allocate joint cost, how much joint cost would be allocated to Product X?

Examples of support departments include all of the following EXCEPT

If a support department's costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department's costs that should be allocated to other departments is