Deck 27: Service Department Charges

Question 1

The long-run average or peak period needs of operating departments would be the most suitable base for allocating:

A) the variable element of power costs.
B) the fixed element of power costs.
C) total power costs.
D) any spending variance associated with power costs.

Answer 1

B

Question 2

All charges for services computed using budgeted rather than actual rates should be removed from an operating department's performance report.

Answer 2

False

Question 3

Levar Corporation has two operating divisions--a Consumer Division and a Commercial Division.The company's Order Fulfillment Department provides services to both divisions.The variable costs of the Order Fulfillment Department are budgeted at $73 per order.The Order Fulfillment Department's fixed costs are budgeted at $470,400 for the year.The fixed costs of the Order Fulfillment Department are determined based on the peak period orders. At the end of the year,actual Order Fulfillment Department variable costs totaled $621,600 and fixed costs totaled $473,970.The Consumer Division had a total of 1,840 orders and the Commercial Division had a total of 6,560 orders for the year.For purposes of evaluation performance,how much Order Fulfillment Department cost should be charged to the Commercial Division at the end of the year?

A) $831,680
B) $855,588
C) $840,918
D) $846,240

Answer 3

A
Explanation:

Question 4

Tabarez Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below:
For performance evaluation purposes,how much Maintenance Department cost should be charged to the Stains Division at the end of the year?

A) $989,002
B) $1,041,416
C) $967,920
D) $1,019,520

Question 5

Fox Company has the following data concerning the machine-hours in its operating departments:
Fixed costs of the maintenance department are budgeted at $30,000 per year.The fixed maintenance costs are incurred in order to service long-run average demand.The actual fixed maintenance cost was actually $32,000.How much fixed maintenance cost should be charged to Department B at the end of the year for performance evaluation purposes?

A) $12,000
B) $14,400
C) $15,000
D) $18,000

Question 6

The medical services department of Fischer Company budgeted $25 of variable medical expenses per employee for May,based on 2,000 employees in operating departments.During May an average of 1,980 employees were employed in operating departments.Actual variable medical expenses totaled $50,700 for the month.How much variable medical expenses should be charged to operating departments at the end of May for performance evaluation purposes?

A) $50,700
B) $49,500
C) $50,000
D) $51,212

Question 7

Schabel Corporation has two operating divisions--a Consumer Division and a Commercial Division.The company's Customer Service Department provides services to both divisions.The variable costs of the Customer Service Department are budgeted at $72 per order.The Customer Service Department's fixed costs are budgeted at $695,400 for the year.The fixed costs of the Customer Service Department are determined based on the peak period orders. At the end of the year,actual Customer Service Department variable costs totaled $891,089 and fixed costs totaled $709,820.The Consumer Division had a total of 2,610 orders and the Commercial Division had a total of 9,580 orders for the year.For performance evaluation purposes,how much actual Customer Service Department cost should NOT be charged to the operating divisions at the end of the year?

A) $13,409
B) $0
C) $14,420
D) $27,829

Question 8

Whenever possible,service department costs should be separated into fixed and variable costs and charged separately to operating departments.

Question 9

Macumber Corporation has two operating divisions--an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $36 per shipment.The Logistics Department's fixed costs are budgeted at $234,000 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. How much Logistics Department cost should be charged to the Atlantic Division at the end of the year for performance evaluation purposes?

A) $198,000
B) $109,800
C) $118,800
D) $96,800

Question 10

Mangiamele Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below:
For performance evaluation purposes,how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

A) $234,000
B) $500,500
C) $279,900
D) $300,300

Question 11

Which of the following companies is following a policy with respect to the costs of service departments that is not recommended?

A) To charge operating departments with the depreciation of forklifts used at its central warehouse, Shalimar Electronics charges predetermined lump-sum amounts calculated on the basis of the long-term average use of the services provided by the warehouse to the various segments.
B) Manhattan Electronics uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building.
C) Rainier Industrial does not allow its service departments to pass on the costs of their inefficiencies to the operating departments.
D) Golkonda Refinery separately allocates fixed and variable costs incurred by its service departments to its operating departments.

Question 12

Variable service department costs should be charged to operating departments at the end of the period according to the formula:

A) Budgeted rate x Budgeted activity.
B) Budgeted rate x Actual activity.
C) Actual rate x Actual activity.
D) Budgeted total cost x Percentage of peak-period capacity required.

Question 13

In service department cost allocations,sales dollars should be used as an allocation base whenever possible.

Question 14

For performance evaluation purposes,the fixed costs of a service department should be charged to operating departments using:

A) actual fixed costs and the budgeted level of activity for the period.
B) budgeted fixed costs and the actual level of activity for the period.
C) budgeted fixed costs and the peak-period or long-run average servicing capacity.
D) actual fixed costs and the peak-period or long-run average servicing capacity.

Question 15

Since sales dollars represents "ability to pay," it is superior to most other bases used for allocating or charging service department costs.

Question 16

For performance evaluation purposes,the actual fixed costs of a service department should be charged to the departments that consume the service in proportion to the actual services provided to the consuming departments during the period.

Question 17

Gretter Corporation has two operating divisions--an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $36 per shipment.The Logistics Department's fixed costs are budgeted at $399,600 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $305,040 and fixed costs totaled $418,680.The Atlantic Division had a total of 2,600 shipments and the Pacific Division had a total of 5,600 shipments for the year.For performance evaluation purposes,how much actual Logistics Department cost should NOT be charged to the operating divisions at the end of the year?

A) $28,920
B) $9,840
C) $19,080
D) $0

Question 18

Oaks Company maintains a cafeteria for its employees.For June,variable food costs were budgeted at $48 per employee based on a budgeted level of 1,000 employees in other departments.During the month,an average of 1,100 employees worked in other departments.The cafeteria's total food costs for the month came to $57,750.How much food cost should be charged to the other departments at the end of the month for performance evaluation purposes?

A) $57,750
B) $52,500
C) $48,000
D) $52,800

Question 19

For performance evaluation purposes,variable service department costs should be charged to operating departments in predetermined,lump-sum amounts.

Question 20

For performance evaluation purposes,any variance over budgeted fixed costs in a service department should be the responsibility of the service department and should not be charged to the departments that use the service.

Question 21

(Appendix 11B) Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow:
The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760.
For performance evaluation purposes,how much of the actual Housekeeping Department costs for September should not be charged to the operating departments?

A) $960
B) $5,760
C) $0
D) $1,240

Question 22

Smurnov Company has a purchasing department that provides services to two factories located in Austin and the other in Belmont.Budgeted costs for the purchasing department consist of $91,000 per year of fixed costs and $7 per purchase order for variable costs.The level of budgeted fixed costs is determined by the peak-period requirements.The Austin factory requires 3/7 of the peak-period capacity and the Belmont factory requires 4/7.
During the year,2,700 purchase orders were processed for the Austin factory and 3,900 purchase orders for the Belmont factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

Question 23

(Appendix 11B) Azotea Corporation has two operating divisions--a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $56 per order. The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders.
At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140. The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year.
How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

A) $7,790
B) $5,440
C) $13,230
D) $0

Question 24

(Appendix 11B) Wollan Corporation has two operating divisions--an East Division and a West Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $44 per shipment. The Logistics Department's fixed costs are budgeted at $237,600 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand.
At the end of the year, actual Logistics Department variable costs totaled $332,880 and fixed costs totaled $253,960. The East Division had a total of 4,300 shipments and the West Division had a total of 3,000 shipments for the year.
How much Logistics Department cost should be allocated to the West Division at the end of the year?

A) $289,176
B) $229,644
C) $241,167
D) $274,560

Question 25

(Appendix 11B) The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $700,000 per year in fixed costs and $0.50 per ton variable cost. Last year, 75,000 tons of crushed stone were budgeted to be delivered to the West Plant and 90,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 74,000 tons of crushed stone to the West Plant and 92,000 tons to the East Plant. Its actual costs for the year were $81,000 variable and $708,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 45% of the peak-period capacity and the East Plant requires 55%. The company allocates fixed and variable costs separately.
How much variable trucking department cost should be charged to the West Plant at the end of the year?

A) $37,500
B) $36,108
C) $42,000
D) $37,000

Question 26

(Appendix 11B) Wollan Corporation has two operating divisions--an East Division and a West Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $44 per shipment. The Logistics Department's fixed costs are budgeted at $237,600 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand.
At the end of the year, actual Logistics Department variable costs totaled $332,880 and fixed costs totaled $253,960. The East Division had a total of 4,300 shipments and the West Division had a total of 3,000 shipments for the year.
How much actual Logistics Department cost should not be allocated to the operating divisions at the end of the year?

A) $28,040
B) $0
C) $16,360
D) $11,680

Question 27

(Appendix 11B) The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $700,000 per year in fixed costs and $0.50 per ton variable cost. Last year, 75,000 tons of crushed stone were budgeted to be delivered to the West Plant and 90,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 74,000 tons of crushed stone to the West Plant and 92,000 tons to the East Plant. Its actual costs for the year were $81,000 variable and $708,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 45% of the peak-period capacity and the East Plant requires 55%. The company allocates fixed and variable costs separately.
How much fixed trucking department cost should be charged to the West Plant at the end of the year?

A) $312,048
B) $315,614
C) $361,600
D) $315,000

Question 28

(Appendix 11B) Mannerman Products, Inc., operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow:
The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.
How much (if any)of the electric power plant's actual fixed costs of $65,000 should not be charged to the other departments?

A) $0
B) $10,000
C) $5,000
D) $15,000

Question 29

(Appendix 11B) Frame Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak-period. Data appear below:

How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year?

A) $12,134
B) $8,194
C) $0
D) $3,940

Question 30

(Appendix 11B) Ghia Manufacturing Corporation charges its Maintenance Department's service costs to two operating departments, Fabrication and Assembly. Charges are made on the basis of machine-hours. Information pertaining to machine-hours for the year follows:
The following costs pertain to the Maintenance Department:

For performance evaluation purposes,how much of the Maintenance Department's fixed cost should be charged to the Assembly Department at year-end?

A) $315,000
B) $337,500
C) $345,600
D) $384,000

Question 31

(Appendix 11B) Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow:
The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760.
How much Housekeeping Department cost should be charged to Rehabilitation at the end of September?

A) $19,840
B) $9,920
C) $9,600
D) $7,440

Question 32

(Appendix 11B) The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $700,000 per year in fixed costs and $0.50 per ton variable cost. Last year, 75,000 tons of crushed stone were budgeted to be delivered to the West Plant and 90,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 74,000 tons of crushed stone to the West Plant and 92,000 tons to the East Plant. Its actual costs for the year were $81,000 variable and $708,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 45% of the peak-period capacity and the East Plant requires 55%. The company allocates fixed and variable costs separately.
For performance evaluation purposes,how much of the actual trucking department cost should not be charged to the plants at the end of the year?

A) $10,000
B) $6,000
C) $0
D) $8,000

Question 33

Nealon Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are determined based on the number of cases produced by the operating departments during the peak-period.Data appear below:
Required:
a.Prepare a report showing how much of the Maintenance Department's costs should be charged to each of the operating divisions at the end of the year.
b.How much of the actual Maintenance Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Question 34

Erholm Corporation has two operating divisions--an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $31 per shipment.The Logistics Department's fixed costs are budgeted at $411,800 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $290,700 and fixed costs totaled $431,950.The Atlantic Division had a total of 3,900 shipments and the Pacific Division had a total of 5,100 shipments for the year.How much Logistics Department cost should be charged to the Pacific Division at the end of the year for performance evaluation purposes?

A) $391,453
B) $425,770
C) $445,498
D) $409,502

Question 35

(Appendix 11B) Ghia Manufacturing Corporation charges its Maintenance Department's service costs to two operating departments, Fabrication and Assembly. Charges are made on the basis of machine-hours. Information pertaining to machine-hours for the year follows:
The following costs pertain to the Maintenance Department:

For performance evaluation purposes,how much of the Maintenance Department's variable cost should be charged to the Fabrication Department at year-end?

A) $36,000
B) $46,400
C) $50,000
D) $56,250

Question 36

(Appendix 11B) Azotea Corporation has two operating divisions--a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $56 per order. The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders.
At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140. The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year.
How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

A) $300,380
B) $309,078
C) $332,409
D) $323,180

Question 37

(Appendix 11B) Nafth Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments. Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours. Data on direct labor-hours for last year follow:
For the year just ended, the company budgeted its variable maintenance costs at $210,000 for the year. Actual variable maintenance costs for the year totaled $255,000.
How much (if any)of the $255,000 in variable maintenance cost should not be charged to the Fabrication and Assembly Departments?

A) $0
B) $15,000
C) $45,000
D) $60,000

Question 38

(Appendix 11B) Frame Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak-period. Data appear below:

How much Maintenance Department cost should be allocated to the Stains Division at the end of the year?

A) $395,313
B) $414,187
C) $405,610
D) $386,960

Question 39

(Appendix 11B) Nafth Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments. Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours. Data on direct labor-hours for last year follow:
For the year just ended, the company budgeted its variable maintenance costs at $210,000 for the year. Actual variable maintenance costs for the year totaled $255,000.
For performance evaluation purposes,how much of the $255,000 of actual variable maintenance cost should be charged to the Assembly Department at the end of the year just ended?

A) $182,143
B) $175,312
C) $165,000
D) $178,500

Question 40

(Appendix 11B) Mannerman Products, Inc., operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow:
The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.
For performance evaluation purposes,how much of the electric power plant's fixed costs should be charged to the Fabrication department at the end of the month for purposes of evaluating performance?

A) $18,000
B) $24,000
C) $30,000
D) $26,000

Question 41

Sauseda Corporation has two operating divisions--an Inland Division and a Coast Division.The company's Customer Service Department provides services to both divisions.The variable costs of the Customer Service Department are budgeted at $38 per order.The Customer Service Department's fixed costs are budgeted at $433,200 for the year.The fixed costs of the Customer Service Department are determined based on the peak-period orders.
At the end of the year,actual Customer Service Department variable costs totaled $303,240 and fixed costs totaled $450,280.The Inland Division had a total of 2,430 orders and the Coast Division had a total of 5,170 orders for the year.
Required:
a.Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.
b.How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Question 42

Gabritz,Inc.has a maintenance department that provides services to the company's two operating departments.The variable costs of the maintenance department are charged on the basis of the number of maintenance hours logged in each department.Last year,budgeted variable maintenance costs were $7.50 per maintenance hour and actual variable maintenance costs were $7.80 per maintenance hour.
The budgeted and actual maintenance hours for each operating department for last year appear below:
Required:
a.Compute the amount of variable maintenance department cost that should have been charged to each operating department at the end of the year for performance evaluation purposes.
b.Compute the amount of actual variable maintenance department cost that should NOT have been charged to the operating departments at the end of the year for performance evaluation purposes.

Question 43

Cannata Corporation has two operating divisions--a North Division and a South Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $32 per shipment.The Logistics Department's fixed costs are budgeted at $372,300 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand.
At the end of the year,actual Logistics Department variable costs totaled $335,000 and fixed costs totaled $382,850.The North Division had a total of 4,700 shipments and the South Division had a total of 5,300 shipments for the year.
Required:
a.Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year.
b.How much of the actual Logistics Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Question 44

Leslie Company operates a cafeteria for the benefit of its employees.The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices.Budgeted and actual costs in the cafeteria for the year just ended are as follows:
*Unrecovered cost after deducting amounts received from employees.
Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments.Fixed costs are charged on the basis of the percentage of peak-period requirements.Data concerning the company's producing departments follows:
Required:
a.Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance.
b.Identify the amount,if any,of actual costs that should not be charged to the operating departments.