Deck 14: Support Department Costing

Question 1

Support departments

A)provide necessary services to the operating units.
B)provide services directly to the customers.
C)provide services directly to the vendors.
D)work directly on the products of the company.

Answer 1

provide necessary services to the operating units.

Question 2

An example of support departments includes all of the following except

A)security.
B)maintenance.
C)sales.
D)machining.

Answer 2

machining.

Question 3

Support departments are also known as

A)cost departments.
B)an operating unit.
C)service departments.
D)indirect departments.

Answer 3

service departments.

Question 4

Support departments costs are related to production

A)as part of both direct labor and direct material costs.
B)as part of direct labor costs.
C)as part of direct material costs.
D)indirectly.

Question 5

The highest cost that relates to support departments costs is

A)personnel.
B)legal.
C)professional fees.
D)accounting.

Question 6

All of the following are types of work completed in a support department except

A)janitorial services for the production facility.
B)maintenance repairs on production machines.
C)security services for the production facility.
D)production work to produce the product.

Question 7

Tasha Burdett, CEO of Burdett Inc. believes that support department costs are facility costs and should not be allocated to the products produced. Which of the following best explains why Tasha is incorrect?

A)Product costs may be inaccurate because direct material and direct labor are not correctly accounted for.
B)Product costs may be inaccurate because support department services may be consumed more heavily by one product than another.
C)Product costs may be inaccurate because administrative costs play a key role in producing the products.
D)Product costs may be inaccurate because operating units do not depend on support services to produce the products.

Question 8

Which of the following statements explains why it is challenging to allocate support department costs, like maintenance work, to products?

A)The costs cannot be adequately known or calculated.
B)The support activities are hard to define.
C)The appropriate allocation base can be difficult to determine.
D)Total costs per department are not accurate and may result in undercharging the customer.

Question 9

What type of costs would support department costs be classified as?

A)indirect costs.
B)direct costs.
C)personnel costs.
D)office supply costs.

Question 10

The best way to allocate support department costs is

A)averaging.
B)based on square footage.
C)based on the number of personnel.
D)based on the support department and the most logical allocation base for that department.

Question 11

Support department costs are applied to product costs as

A)variable cost of goods sold.
B)overhead.
C)fixed manufacturing costs.
D)fixed selling and administrative costs.

Question 12

Service department costs should be allocated to a user department because

A)they consume costs of the operating unit.
B)a user department uses the services of a service department.
C)they measure plant capacity.
D)they are the final costs of the product.

Question 13

Which of the following allocation bases would be appropriate to allocate the costs of the company cafeteria?

A)Square footage of the cafeteria.
B)The number of hours the facility has used.
C)The number of meals that are served.
D)The number of personnel in the organization.

Question 14

Which of the following department(s) would most likely use machine hours to allocate its support costs?

A)maintenance.
B)personnel.
C)purchasing.
D)maintenance and personnel.

Question 15

Which of the following reasons for allocating service department costs to user departments would not be applicable?

A)Provide the best possible incentives for each service level.
B)Accurately calculate the profitability of each operating unit.
C)Evaluate the performance of managers.
D)Correctly calculate the units' profit contribution to the company.

Question 16

Support department costs are

A)rarely found in a manufacturing organization.
B)allocated by the user department to the units produced.
C)treated as period costs.
D)expensed as incurred.

Question 17

Which support department costs would most likely allocate its costs based on square footage?

A)Accounting.
B)Maintenance.
C)Cafeteria.
D)Custodial.

Question 18

All of the following would be considered a support department in a manufacturing company except

A)design.
B)assembly.
C)human resources.
D)information technology.

Question 19

All the following would be adequate criteria for selecting an allocation base for support departments except

A)the sales dollars generated during the period.
B)the extent of facilities provided.
C)the ease of allocating the costs.
D)the direct benefits from the service provided.

Question 20

Determining the basis used to allocate support department costs follows which guideline?

A)Revenue generation.
B)Profit maximization.
C)Cause and effect.
D)Goal comparison.

Question 21

A local community college has more than 15 different departments. The testing department assists instructors in grading exams. TRIO attempts to teach students valuable skills of innovation on surviving college. How would these two departments be classified?

A)
B)
C)
D)

Question 22

The key implementation issue for cost allocation is the

A)complexity of the equation.
B)time-intensive calculations.
C)changes in financial reporting.
D)choice of the more accurate allocation method.

Question 23

The accountant of XYZ Company allocated support department costs between its two divisions. The information for each division is as follows: What is the gross margin for Division A?

A)$200,000.
B)$120,000.
C)$105,000.
D)$15,000.

Question 24

The accountant of XYZ Company allocated support department costs between its two divisions. The information for each division is as follows: What is the gross margin for Division B?

A)$120,000.
B)$40,000.
C)$30,000.
D)$10,000.

Question 25

The accountant of XYZ Company allocated support department costs between its two divisions. The information for each division is as follows: What is the operating income for Division A?

A)$200,000.
B)$120,000.
C)$105,000.
D)$15,000.

Question 26

The accountant of XYZ Company allocated support department costs between its two divisions. The information for each division is as follows: What is the operating income for Division B?

A)$120,000.
B)$40,000.
C)$30,000.
D)$10,000.

Question 27

CCC Inc. operates two separate divisions. The admissions department produces revenues of $50,000 per year with a cost of service of $12,000. The company also incurs the following centralized operating costs: All support costs are allocated between the two divisions. Based on the accountant's calculation, the admission department's share of support costs is $4,000. How much will CCC report for a gross margin and operating income for the admissions department?

A)$38,000, $34,000.
B)$38,000, $24,500.
C)$50,000, $34,000.
D)$50,000, $24,500.

Question 28

All of the following methods are acceptable allocation methods except the

A)reciprocal method.
B)direct method.
C)step method.
D)average method.

Question 29

Which method of allocating support department costs is easiest but least accurate?

A)reciprocal method.
B)direct method.
C)step method.
D)average method.

Question 30

Which method of allocating support department costs is most accurate but also more complex?

A)reciprocal method.
B)direct method.
C)step method.
D)average method.

Question 31

Which method of allocating support department costs does not provide data for the support departments to monitor each other's costs?

A)reciprocal method.
B)direct method.
C)step method.
D)average method.

Question 32

If a company uses the direct method of allocating support department costs to production departments, which of the following statements is true?

A)The direct method is more complex than the step method.
B)The direct method only allocates some of the support department costs directly to production and is more accurate than the reciprocal method.
C)The direct method allocates all the support department costs directly to the production departments and is the simplest method.
D)The direct method requires that the same allocation method be used for each support department.

Question 33

Dickson Company has two production departments and two support departments. Each department occupies the following square footage: Housekeeping department costs are allocated on the basis of the square footage of space. If the budget for housekeeping costs is $45,000, what amount would be allocated to Administration using the direct method to allocate costs?

A)$0.
B)$4,821.
C)$8,036.
D)$16,875.

Question 34

Dickson Company has two production departments and two support departments. Each department occupies the following square footage: Housekeeping department costs are allocated on the basis of the square footage of space. If the budget for housekeeping costs is $45,000, what amount would be allocated to the accounting department using the direct method?

A)$0.
B)$16,071.
C)$22,500.
D)$45,000.

Question 35

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Accounting department costs are allocated on the basis of the number of employees. If the budget for accounting costs is $98,000, what amount would be allocated to Machining using the direct method?

A)$0.
B)$67,497.
C)$67,947.
D)$68,865.

Question 36

Using the direct method, Natasha allocates Custodial Department costs based on square footage serviced and budgets $25,000 for the coming period. She allocates Accounting Department costs based on the number of employees served and is budgeting $105,000 for the next period. She shows the following information about the two service departments and two production departments. The total amount of costs allocated to Machining from the Custodial Department and Accounting Department is

A)$77,910.
B)$79,873.
C)$87,413.
D)$95,417.

Question 37

Using the direct method, Natasha allocates Custodial Department costs based on square footage serviced and budgets $25,000 for the coming period. She allocates Accounting Department costs based on the number of employees served and is budgeting $105,000 for the next period. She shows the following information about the two service departments and two production departments. The total amount of costs allocated to Assembly from the Custodial Department and Accounting Department is

A)$27,902.
B)$28,585.
C)$34,583.
D)$37,985.

Question 38

Spirits and More operates two departments, Cutting and Fabrication. Two service departments, maintenance and purchasing, are also included within the company. The operating costs and distribution of each service department's efforts to the other departments is as follows: Using the direct method of allocating support costs, what is the total cost accumulated in the cutting department?

A)$32,877.
B)$80,000.
C)$85,600.
D)$112,877.

Question 39

Spirits and More operates two departments, Cutting and Fabrication. Two service departments, maintenance and purchasing, are also included within the company. The operating costs and distribution of each service department's efforts to the other departments is as follows: Using the direct method of allocating support costs, what is the total cost accumulated in the fabrication department?

A)$56,000.
B)$70,123.
C)$77,750.
D)$126,123.

Question 40

If a company operates two producing departments and they are serviced by the same three support departments, which support departments costs should be allocated first when using the step method?

A)The support department that provides the most service to other support departments.
B)The support department with the least amount of cost.
C)The support department that provides the most service to the user departments.
D)The service department that provides the least service to other service departments.

Question 41

When using the step method to allocate support department costs, what is considered a weakness in the method?

A)The order of support department allocation must be determined.
B)All intradepartmental supports are ignored.
C)All interdepartmental supports are ignored.
D)Computations are more complex than the reciprocal method.

Question 42

What is the first step in allocating support costs using the step method?

A)Allocate costs from the highest-ranked support department to the other support departments and operating units.
B)Rank support departments by the service that provides the most support to other support departments.
C)Rank support departments by the service that provides the most support to the operating units.
D)Allocate costs from the highest-ranked support department to the other support departments.

Question 43

What is the second step in allocating support costs using the step method?

A)Allocate costs from the highest-ranked support department to the other support departments and operating units.
B)Rank support departments by the service that provides the most support to other support departments.
C)Rank support departments by the service that provides the most support to the operating units
D)Allocate costs from the highest-ranked support department to the other support departments.

Question 44

When using the step method to allocate support department costs, which of the following statements is true?

A)The step method is also called the step-up method.
B)The step method is more accurate than the direct method but less accurate than the reciprocal method.
C)The step method requires the same allocation base to be used for each support department.
D)The step method captures some, but not all, inter-support department services by allocating support department costs to other support departments and production departments.

Question 45

When determining the sequence of support, using the step method to allocate support department costs, all of the following statements are true except:

A)Departments with more employees are allocated earlier.
B)Departments with more accurate allocation bases are allocated earlier.
C)Departments that serve a larger number of support departments are allocated earlier.
D)Departments that have a higher cost are allocated earlier.

Question 46

Which of the following best explains the major difference between the direct method and step method?

A)Under the step method, the total support department costs to be allocated will also include any costs that were allocated to that support department from other support departments.
B)Under the direct method, the total support department costs to be allocated will also include any costs that were allocated to that support department from other support departments.
C)Under the step method, the total support department costs to be allocated will never include any costs that were allocated to that support department from other support departments.
D)Under the step method, every support department receives costs allocated from every other support department.

Question 47

Dickson Company has two production departments and two support departments. Each department occupies the following square footage: Housekeeping department costs are allocated on the basis of the square footage of space. If the budget for housekeeping costs is $45,000, what amount would be allocated to Administration using the step method to allocate costs?

A)$0.
B)$4,821.
C)$6,750.
D)$16,875.

Question 48

Dickson Company has two production departments and two support departments. Each department occupies the following square footage: Support department costs are allocated on the basis of the square footage of space. If the budget for administration costs is $67,000 and housekeeping costs are $45,000, what amount would be allocated to housekeeping (from administration) using the step method to allocate costs?

A)$0.
B)$7,179.
C)$8,739.
D)$67,000.

Question 49

Dickson Company has two production departments and two support departments. Each department occupies the following square footage: Support department costs are allocated on the basis of the square footage of space. If the administration costs are $67,000 and housekeeping costs are $45,000, what amount would be allocated to the accounting department if the company uses the step method?

A)$26,870.
B)$29,130.
C)$53,739.
D)$56,000.

Question 50

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. What amount would be allocated to accounting using the step method?

A)$0.
B)$278.
C)$14,000.
D)$21,000.

Question 51

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. What amount would be allocated to the human resource department using the step method?

A)$0.
B)$649.
C)$658.
D)$98,000.

Question 52

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. What amount of human resource costs would be allocated to machining, using the step method?

A)$14,757.
B)$14,917.
C)$15,219.
D)$21,000.

Question 53

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. What amount of human resource costs would be allocated to assembly, using the step method?

A)$6,243.
B)$6,311.
C)$6,439.
D)$21,000.

Question 54

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. How much in total support costs would be allocated to machining, using the step method?

A)$82,413.
B)$83,622.
C)$68,403.
D)$119,000.

Question 55

Expo manufacturing has two production departments and two support departments. The number of employees for each department is as follows: Human Resources shows a budget of $21,000 and accounting, $98,000, for the coming year. Support department costs are allocated on the basis of the number of employees. How much in total support costs would be allocated to assembly, using the step method?

A)$34,867.
B)$35,378.
C)$28,940.
D)$119,000.

Question 56

Using the step method, Natasha allocates Custodial Department costs based on square footage serviced and budgets $25,000 for the coming period. She allocates Accounting Department costs based on the number of employees served and is budgeting $105,000 for the next period. She shows the following information about the two service departments and two production departments. Assuming Natasha allocates the accounting costs first, how much support costs would be allocated to the Custodial Department?

A)$2,188.
B)$14,189.
C)$27,188.
D)$39,189.

Question 57

Using the step method, Natasha allocates Custodial Department costs based on square footage serviced and budgets $25,000 for the coming period. She allocates Accounting Department costs based on the number of employees served and is budgeting $105,000 for the next period. She shows the following information about the two service departments and two production departments. Assuming Natasha allocates the accounting costs first, how much in support costs would be allocated to machining?

A)$68,108.
B)$70,000.
C)$87,635.
D)$94,234.

Question 58

Using the step method, Natasha allocates Custodial Department costs based on square footage serviced and budgets $25,000 for the coming period. She allocates Accounting Department costs based on the number of employees served and is budgeting $105,000 for the next period. She shows the following information about the two service departments and two production departments. Assuming Natasha allocates the accounting costs first, how much in support costs would be allocated to assembly?

A)$22,703.
B)$35,000.
C)$35,766.
D)$40,878.

Question 59

When using the reciprocal method, which function in excel can assist in solving the allocation?

A)Goal Seek.
B)Solver.
C)Iterations.
D)Regression.

Question 60

When allocating support department costs, the reciprocal method is preferred over the step method because it considers all reciprocal flows between

A)support departments.
B)producing departments.
C)user departments.
D)competing departments.

Question 61

Which method is considered the more accurate method in allocating costs because it first recognizes interdepartmental support services?

A)Direct method.
B)Step method.
C)Reciprocal method.
D)All three methods.

Question 62

Which of the following statements best explains the significant difference between the step method and the reciprocal method?

A)Under the reciprocal method, some but not all inter-support-department services are allocated to support departments.
B)Under the reciprocal method, all inter-support-department services are allocated to support departments.
C)The reciprocal method is less accurate than the step method.
D)The reciprocal method is easier to implement than the step method.

Question 63

When using the reciprocal method to allocate support costs, which of the following equations represents the algebraic expression for the total costs of a Custodial Department (C) that includes not only $120,000 of direct costs but also 15% of the Maintenance Departments (M) cost?

A)C = $120,000 + (.15 ÷ M).
B)C = ($120,000 x .15) + M.
C)C = $120,000 - (.15 x M).
D)C = $120,000 + (.15 x M).

Question 64

When using the reciprocal method to allocate support costs, which of the following equations represents the two algebraic expressions needed for the total costs of a Custodial Department (C) that includes not only $120,000 of direct costs but also 15% of the Maintenance Departments (M) cost and the Maintenance Department that consists of $10,000 of direct costs and $40% of the Custodial Department?

A)C = $120,000 + (.15 ÷ M) and M = $10,000 + (.40 ÷ C).
B)C = ($120,000 x .15) + M and M = ($10,000 x .40) + C.
C)C = $120,000 - (.15 x M) and M = $10,000 - (.40 x C).
D)C = $120,000 + (.15 x M) and M = $10,000 + (.40 x C).

Question 65

Xaric Industries operates two support departments, Personnel and Accounting, and two producing departments, Fabrication and Assembly. Information on the support percentages and cost for each department is as follows: Using the reciprocal method of allocating support costs, what is the total cost allocated from the Personnel Department?

A)$15,573.
B)$8,000.
C)$9,500.
D)$15,000.

Question 66

Xaric Industries operates two support departments, Personnel and Accounting, and two producing departments, Fabrication and Assembly. Information on the support percentages and cost for each department is as follows: Using the reciprocal method of allocating support costs, what is the total cost allocated from the Accounting Department?

A)$15,573.
B)$8,000.
C)$9,500.
D)$9,557.

Question 67

Xaric Industries operates two support departments, Personnel and Accounting, and two producing departments, Fabrication and Assembly. Information on the support percentages and cost for each department is as follows: Using the reciprocal method of allocating support costs, what is the total cost allocated to the Fabrication Department from the two support departments?

A)$10,300.
B)$9,943.
C)$9,250.
D)$10,229.

Question 68

Xaric Industries operates two support departments, Personnel and Accounting, and two producing departments, Fabrication and Assembly. Information on the support percentages and cost for each department is as follows: Using the reciprocal method of allocating support costs, what is the total cost allocated to the Assembly Department from the two support departments?

A)$11,000.
B)$12,859.
C)$12,771.
D)$11,770.

Question 69

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What amount of costs would be allocated from the accounting department to the other support departments (admin and HR) using the reciprocal method to allocate costs?

A)$0.
B)$27,284.
C)$28,620.
D)$28,833.

Question 70

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What amount of costs would be allocated from the administrative department to the other support departments (Acct and HR) using the reciprocal method to allocate costs?

A)$0.
B)$15,741.
C)$16,511.
D)$17,158.

Question 71

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What amount of costs would be allocated from the HR department to the other support departments (Acct and Admin) using the reciprocal method to allocate costs?

A)$0.
B)$4,990.
C)$6,296.
D)$6,605.

Question 72

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What are the total costs allocated from the accounting department to the operating units?

A)$0.
B)$265,789.
C)$274,765.
D)$276,511.

Question 73

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What are the total costs allocated from the administrative department to the operating units?

A)$0.
B)$160,144.
C)$160,168.
D)$170,890.

Question 74

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What are the total costs allocated from the HR department to the operating units?

A)$0.
B)78,164.
C)$81,402.
D)$86,072.

Question 75

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What are the total costs allocated to the surgery department from the supporting departments?

A)$0.
B)$243,642.
C)$265,466.
D)$267,642.

Question 76

Grey's Medical operates three support departments and two operating units, Surgery and ER. The support departments are allocated based on the hours used. The cost of operating the accounting (acct), administration (admin), and human resources (HR) departments is $260,000, $150,000, and $60,000, respectively. Information on the hours used are as follows: What are the total costs allocated to the ER department from the supporting departments?

A)$0.
B)$179,524.
C)$192,466.
D)$204,534.

Question 77

A common cost occurs when

A)different resources are used to produce one business unit.
B)a resource is used by two or more companies.
C)only one product or service is benefited.
D)the same resource is used for two or more business units.

Question 78

All of the following would be considered common costs except

A)a pool in a hotel.
B)utilities in a college dorm.
C)advertising expenses shared between two business units in the same city.
D)direct materials for a manufacturing company.

Question 79

Which methods are acceptable ways to allocate common costs?

A)stand-alone cost allocation method.
B)stand-alone cost allocation method and incremental cost allocation method.
C)incremental cost allocation method.
D)stand-alone cost allocation method and direct costing allocation method.

Question 80

When allocating common costs, which method allocates the cost based on the percentage paid?

A)stand-alone cost allocation method.
B)step cost allocation method.
C)incremental cost allocation method.
D)direct costing allocation method.