Exam 7: Allocating Costs of Support Departments and Joint Products

Citizens Bank has two bank locations: Main and Suburbs. The central office provides check-processing services for the two banks. Information pertaining to the banks is as follows: a. Use the direct method to allocate the check-processing center costs to each bank to provide information for setting service charges. b. Use the direct method to allocate the check processing center costs to each bank for performance evaluation purposes. c. Determine the costs of the check-processing center NOT allocated to the two banks. Why were these costs not allocated to the operating units?

The sequential method allocates costs in ranking order of support departments.

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 S1?

Hunghi Company has three support departments whose direct department costs are $35,000, $45,000, and $55,000, respectively, and two producing departments whose direct department costs are $400,000 and $360,000, respectively. The combined total department cost for the producing departments after allocation of the support departments is

Departmental overhead is applied to products passing through the department.

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 1 are

Rules of financial reporting (GAAP) require

Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: What amount of joint costs will be allocated to first and second using the physical units method?

A secondary product recovered in the course of manufacturing a primary product during a joint process is called a:

Andover, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: Support department hours used: Support department costs: Normal support department usage is 8,000 hours each for Department X and Department Y. Assuming the direct method is used and the purpose is performance evaluation, support department costs allocated to Department X are

Impacto Corporation produces four products in a joint process for $650,000. The following information is available on total sales and production in units: What amount of joint costs will be allocated to I based on the physical units method?