Deck 7: Allocating Costs of Support Departments and Joint Products

Question 1

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

A)machine hours
B)direct labour hours
C)number of employees
D)square metres

Answer 1

A

Question 2

What type of costs are support department costs to the producing departments?

A)direct materials
B)direct labour
C)activity driver
D)common cost

Answer 2

D

Question 3

What would be the result if the costs of support departments were allocated to producing departments?

A)Product costs would be understated.
B)GAAP requirements would not be met.
C)Managers of producing departments might tend to overconsume services.
D)Support department profitability could be determined.

Answer 3

D

Question 4

According to the rules of financial reporting (GAAP),which costs are assigned to products?

A)Direct materials and direct labour costs are assigned to products.
B)Producing department costs are assigned to products exclusively.
C)Direct costs and a fair share of indirect manufacturing costs are assigned to products.
D)Indirect manufacturing costs be assigned to products.

Question 5

What is the purpose of support departments?

A)They are responsible for manufacturing the products sold to customers.
B)They work directly on the products of the firm.
C)They provide services directly to customers.
D)They provide essential services to the producing departments.

Question 6

Which of the following departments is a producing department?

A)food services
B)bottling
C)health services
D)security

Question 7

Which of the following cost categories would most likely use machine hours as its activity driver?

A)personnel
B)maintenance
C)purchasing
D)shipping

Question 8

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

A)machine hours
B)direct labour hours
C)number of employees
D)square metres

Question 9

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

A)to value inventory
B)to obtain a mutually agreeable price
C)to compute product-line profitability
D)to detect fraud

Question 10

Which of the following is a major objective of allocation?

A)to obtain a mutually agreeable price
B)to compute product-line profitability
C)to predict the economic effects of planning and control
D)to calculate corporate profitability

Question 11

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

A)maintenance
B)purchasing
C)personnel
D)accounting

Question 12

The Zink Company assigns plant administration costs to the production departments based on the number of employees.Which of the following would be a good combination of common costs with an activity driver?

A)personnel department costs based on machine hours
B)purchasing department costs based on machine hours
C)cafeteria costs based on direct labour hours
D)warehouse costs based on the value of materials stored

Question 13

Which of the following is one of the major objective(s)of allocations?

A)to motivate line employees
B)to compute corporate profitability
C)to value inventory
D)to calculate fixed costs

Question 14

How are support department costs accounted for?

A)They are allocated directly to units of product.
B)They are allocated to producing departments and then allocated to units of product.
C)They are allocated to units of product and then allocated to the producing departments.
D)They are expensed as incurred.

Question 15

When does a common cost occur?

A)when only one product or service is benefited
B)when different resources are used to produce one output
C)when the same resource is used in the output of two or more outputs
D)when a resource is used by two or more companies

Question 16

What would be a possible causal factor to use when allocating cafeteria costs?

A)number of square metres
B)number of direct labour hours
C)number of employees
D)appraised value of square metres

Question 17

Which of the following departments is a service department?

A)mixing
B)moulding
C)packaging
D)accounting

Question 18

What is one of the potential advantages of allocating support departments to production departments?

A)Total costs would not be accumulated.
B)Managers may tend to overconsume these services.
C)This would encourage managers to monitor support department performance.
D)Managers will use a support service at a less efficient level.

Question 19

Which of the following departments is a producing department?

A)maintenance
B)personnel
C)machining
D)data processing

Question 20

What is the term for activities or variables within a producing department that provoke the incurrence of support costs?

A)causal factors
B)common costs
C)cost objectives
D)activity output

Question 21

If the allocation is for product costing,how would the allocation of variable support department costs be calculated?

A)Actual rate * Actual usage
B)Actual rate * Budgeted usage
C)Budgeted rate * Actual usage
D)Budgeted rate * Budgeted usage

Question 22

Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr} \text { Varnable costs } &\$ 34 \text { per trip } \\ \text {Fixed costs } &\$ 143,360\\\end{array}$

$\begin{array}{lcc}\text { The budgeted usage is given below: }\\&\text {Yearly Trips}&\text {Monthly Peak Trip}\\\text { West Sales Territory } & 110 \text { trips } & 5 \\\text { Midwest Sales Territory } & 170 \text { trips } & 12 \\\text { Southern Sales Territory } & 150 \text { trips } & 15 \\\text { Eastern Sales Territory } & 130 \text { trips } & 8\\\\\text { The actual usage is given helow }\\\text { West Sales Territory } & 100 \text { trips } \\\text { Midwest Sales Territory } & 150 \text { trips } \\\text { Southern Sales Territory } & 160 \text { trips } \\\text { Eastern Sales Territory } & 140 \text { trips }\end{array}$

-Refer to the figure.Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips,what will the West Sales Territory be charged for the year (rounded to the nearest dollar)?

A)$21,320
B)$29,492
C)$30,638
D)$31,498

Question 23

What is a disadvantage of the costs of support departments being allocated to production departments?

A)The allocation assists producing departments' use of support departments at a more efficient level.
B)Allocation of support department costs encourages managers of production departments to monitor performance of the support department.
C)The allocation helps each department select the correct level of support service consumption.
D)Management will use the information to support outsourcing all support services.

Question 24

Yo Department Store incurred $4,000 of indirect advertising costs for its operations. The following data has been collected for the current year for its three departments:
$\begin{array}{lccc}&\text {Shoes }&\text {Cosmetics }&\text {Crafts }\\\text { Sales } & \$ 160,000 & \$ 120,000 & \$ 120,000 \\\text { Direct advertising costs } & \$ 7,000 & \$ 10,000 & \$ 3,000 \\\text { Newspaper ad space } & 62 \% & 20 \% & 18 \%\end{array}$

-Refer to the figure.How much of the indirect advertising costs will be allocated to the Shoes Department if newspaper ad space is the activity driver?

A)$1,520
B)$2,480
C)$4,000
D)$4,340

Question 25

Xi Print operates a copy business at two different locations. Xi 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 centre 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:

$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 600,000 & 400,000 \\\text { Actual activity (copies) } & 500,000 & 440,000\end{array}$

-Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 2?

A)$24,000
B)$28,800
C)$51,200
D)$60,000

Question 26

Wilson, Inc., operates a copy business at two different locations. Wilson, Inc., 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 centre on the basis of total copies 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 (copies made) are as follows:
$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 1,200,000 & 800,000 \\\text { Actual activity (copies) } & 1,000,000 & 880,000\end{array}$

-Refer to the figure.What support department costs are NOT allocated to the two copy centres?

A)$8,000
B)$16,800
C)$19,680
D)$44,000

Question 27

Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr} \text { Varnable costs } &\$ 34 \text { per trip } \\ \text {Fixed costs } &\$ 143,360\\\end{array}$

$\begin{array}{lcc}\text { The budgeted usage is given below: }\\&\text {Yearly Trips}&\text {Monthly Peak Trip}\\\text { West Sales Territory } & 110 \text { trips } & 5 \\\text { Midwest Sales Territory } & 170 \text { trips } & 12 \\\text { Southern Sales Territory } & 150 \text { trips } & 15 \\\text { Eastern Sales Territory } & 130 \text { trips } & 8\\\\\text { The actual usage is given helow }\\\text { West Sales Territory } & 100 \text { trips } \\\text { Midwest Sales Territory } & 150 \text { trips } \\\text { Southern Sales Territory } & 160 \text { trips } \\\text { Eastern Sales Territory } & 140 \text { trips }\end{array}$

-Refer to the figure.Using a single charging rate,how much will be charged to the West Sales Territory?

A)$28,160
B)$29,000
C)$29,500
D)$31,900

Question 28

Xi Print operates a copy business at two different locations. Xi 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 centre 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:

$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 600,000 & 400,000 \\\text { Actual activity (copies) } & 500,000 & 440,000\end{array}$

-Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 1?

A)$30,000
B)$32,800
C)$36,000
D)$37,600

Question 29

Yo Department Store incurred $4,000 of indirect advertising costs for its operations. The following data has been collected for the current year for its three departments:
$\begin{array}{lccc}&\text {Shoes }&\text {Cosmetics }&\text {Crafts }\\\text { Sales } & \$ 160,000 & \$ 120,000 & \$ 120,000 \\\text { Direct advertising costs } & \$ 7,000 & \$ 10,000 & \$ 3,000 \\\text { Newspaper ad space } & 62 \% & 20 \% & 18 \%\end{array}$

-Refer to the figure.How much of the indirect advertising costs will be allocated to the Cosmetics Department if direct advertising costs is the activity driver?

A)$2,000
B)$4,000
C)$5,000
D)$10,000

Question 30

What is the most likely action to be taken by a company when a support department is less cost effective as an outside source?

A)The company may force managers to use the internal support department.
B)The company may force managers to use an external source for the service.
C)The company may elect not to supply the service internally.
D)The company may elect not to supply the service externally.

Question 31

If a support department's costs were budgeted to be $150,000 and actual costs incurred by the support department were $200,000,what should be the total amount of the support department's costs allocated to other departments?

A)$50,000
B)$150,000
C)$200,000
D)$350,000

Question 32

Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr} \text { Varnable costs } &\$ 34 \text { per trip } \\ \text {Fixed costs } &\$ 143,360\\\end{array}$

$\begin{array}{lcc}\text { The budgeted usage is given below: }\\&\text {Yearly Trips}&\text {Monthly Peak Trip}\\\text { West Sales Territory } & 110 \text { trips } & 5 \\\text { Midwest Sales Territory } & 170 \text { trips } & 12 \\\text { Southern Sales Territory } & 150 \text { trips } & 15 \\\text { Eastern Sales Territory } & 130 \text { trips } & 8\\\\\text { The actual usage is given helow }\\\text { West Sales Territory } & 100 \text { trips } \\\text { Midwest Sales Territory } & 150 \text { trips } \\\text { Southern Sales Territory } & 160 \text { trips } \\\text { Eastern Sales Territory } & 140 \text { trips }\end{array}$

-Refer to the figure.Using a single charging rate,determine the rate per trip.

A)$256
B)$290
C)$295
D)$261

Question 33

Wilson and Lewis,a large law firm,utilizes an internal centralized printing centre 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 the figure.If the Corporate Department used 190,000 pages,what would be the printing charges for the Corporate Department (rounded to the nearest dollar)?

A)$7,600
B)$39,900
C)$42,195
D)$47,500

Question 34

Xi Print operates a copy business at two different locations. Xi 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 centre 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:

$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 600,000 & 400,000 \\\text { Actual activity (copies) } & 500,000 & 440,000\end{array}$

-Refer to the figure.What support department costs are NOT allocated to the two copy centres?

A)$6,000
B)$8,400
C)$9,840
D)$22,000

Question 35

Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr} \text { Varnable costs } &\$ 34 \text { per trip } \\ \text {Fixed costs } &\$ 143,360\\\end{array}$

$\begin{array}{lcc}\text { The budgeted usage is given below: }\\&\text {Yearly Trips}&\text {Monthly Peak Trip}\\\text { West Sales Territory } & 110 \text { trips } & 5 \\\text { Midwest Sales Territory } & 170 \text { trips } & 12 \\\text { Southern Sales Territory } & 150 \text { trips } & 15 \\\text { Eastern Sales Territory } & 130 \text { trips } & 8\\\\\text { The actual usage is given helow }\\\text { West Sales Territory } & 100 \text { trips } \\\text { Midwest Sales Territory } & 150 \text { trips } \\\text { Southern Sales Territory } & 160 \text { trips } \\\text { Eastern Sales Territory } & 140 \text { trips }\end{array}$

-Refer to the figure.Fixed costs are allocated on the basis of monthly peak trips.Using both a fixed and variable rate,what are the respective rates for fixed and variable costs per trip for the West Sales Territory?

A)12.5%; $34
B)18.2%; $34
C)19%; $34
D)19.6%; $34

Question 36

Wilson, Inc., operates a copy business at two different locations. Wilson, Inc., 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 centre on the basis of total copies 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 (copies made) are as follows:
$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 1,200,000 & 800,000 \\\text { Actual activity (copies) } & 1,000,000 & 880,000\end{array}$

-Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 1?

A)$60,000
B)$65,600
C)$72,000
D)$75,200

Question 37

Wilson and Lewis,a large law firm,utilizes an internal centralized printing centre 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 the figure.If the total pages printed were 340,000,which of the following statements is correct?

A)The printing costs allocated to all departments would be $80,000.
B)The printing department would expect to incur costs of $82,790.
C)Any extra amount charged is due to the variable costs being charged as if they were fixed costs.
D)The Corporate Department would incur costs of $50,000.

Question 38

If the allocation is for performance evaluation,how would the allocation of variable support department costs be calculated?

A)Actual rate * Actual usage
B)Actual rate* Budgeted usage
C)Budgeted rate * Actual usage
D)Budgeted rate * Budgeted usage

Question 39

Wilson, Inc., operates a copy business at two different locations. Wilson, Inc., 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 centre on the basis of total copies 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 (copies made) are as follows:
$\begin{array}{lll}&\text { Copy Centre } 1&\text { Copy Centre } 2\\\text { Normal activity (copies) } & 1,200,000 & 800,000 \\\text { Actual activity (copies) } & 1,000,000 & 880,000\end{array}$

-Refer to the figure.For purposes of performance evaluation,what are the fixed costs allocated to Copy Centre 2?

A)$48,000
B)$57,600
C)$102,400
D)$120,000

Question 40

Wilson and Lewis,a large law firm,utilizes an internal centralized printing centre 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 the figure.Assuming a single charging rate is used,what would be the charge per page (rounded to the nearest cent)?

A)$.04
B)$.21
C)$.25
D)$.75

Question 41

Morris Manufacturing Company has two support departments,Maintenance Department and Personnel Department,and two producing departments,X and Y.The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $4,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $9,000 and $15,000,respectively. Data on standard service hours and number of employees are as follows:
$\begin{array}{lcccc} & \text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \\& \underline{\text { Dept. }} & \underline{\text { Dept. }} & \underline{\mathbf{X}} & \underline{\mathbf{Y}} \\\text { Standard service hours used } & 100 & 75 & 600 & 300 \\\text { Number of employees } & 50 & 100 & 150 & 150 \\\text { Dirert lahnur houre }& 125 & 125 & 500 & 250\end{array}$



- What are the total overhead costs associated with Department X after allocating the Maintenance and Personnel Departments using the direct method?

A)$9,000
B)$11,250
C)$29,000
D)$31,250

Question 42

Which of the following methods allocates support department costs?

A)direct allocation method
B)reciprocal allocation method
C)sequential allocation method
D)multi-step allocation method

Question 43

Newton Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $120,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $18,000 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:
$$\begin{array} { l c c c c } & \text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept. } \\& \text { Dept. } & \text { Dept. } & \text { P1 } & \text { p2 } \\\text { Standard service hours used } & 400 & 200 & 1,200 & 600 \\\text { Number of emplayes }& 20 & 40 & 180 & 180 \\\text { Direct labour hours } & 200 & 200 & 1,000 & 1,000\end{array}$$


-Refer to the figure.What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

A)$60,000
B)$69,000
C)$100,000
D)$109,000

Question 44

A company incurred $40,000 of common fixed costs and $60,000 of common variable costs.These costs are to be allocated to Departments A and B.Data on capacity provided and capacity used are as follows: $$\begin{array} { c c c } & \text { Capacity Provided } & \text { Capacity Used } \\\text { Department } & \text { in Hours } & \text { in Hours } \\\text { A } & 400 & 320 \\\text { B } & 240 & 320\end{array}$$ Assume that common fixed costs are to be allocated to Departments A and B on the basis of capacity provided and that common variable costs are to be allocated to Departments A and B on the basis of capacity used.What are the fixed and variable costs allocated to Department A?
$\begin{array}{lll}&&\text { Fixed}&\text { Variable }\end{array}$

A) $\begin{array}{lll}& \$ 20,000 & \$ 30,000 \\\end{array}$
B) $\begin{array}{lll} & \$ 20,000 & \$ 37,500 \\\end{array}$
C) $\begin{array}{lll} & \$ 25,000 & \$ 30,000 \\\end{array}$
D) $\begin{array}{lll}& \$ 25,000 & \$ 37,500\end{array}$

Question 45

The following information pertains to Utter Company: Utter 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 labour hours.(Round amounts to dollars.)

-
If the direct method is used to allocate support department costs,what would be the predetermined overhead rate for the Fabrication Department (rounded to two decimal places)?

A)$5.40
B)$7.28
C)$24.78
D)$28.80

Question 46

Which of the following is a basic guideline that should be followed when allocating support department costs?

A)Actual costs should always be used for allocations.
B)Budgeted costs,not actual costs,should be allocated.
C)Service department costs should never be allocated at the beginning of the period.
D)Producing department costs should never be allocated at the beginning of the period.

Question 47

Staff Company allocates common Building Department costs to producing departments (P1 and P2)based on space occupied,and it allocates common Personnel Department costs based on the number of employees.Space occupancy and employee data are as follows: $\begin{array}{lcccc}&\text { Building } & \text { Personnel } & \text { Dept.P1 }&\text { Dept. P2 }\\\text { Space occupied } & 2,000 \mathrm{~m} & 10,000 \mathrm{~m} & 120,000 \mathrm{~m} & 70,000 \mathrm{~m} \\\text { Employees } & 6 & 10 & 80 & 50\end{array}$
If Staff Company uses the direct allocation method,what is the ratio representing the portion of building costs allocated to Department P1?

A)2,000/120,000
B)120,000/190,000
C)120,000/202,000
D)190,000/202,000

Question 48

Lopez Manufacturing prices its products at full cost plus 40 percent.The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square metres,and Support Department B's costs are allocated based on number of employees.Department C uses direct labour hours to assign overhead costs to products,while Department D uses machine hours.
One of the products the company produces requires 4 direct labour hours per unit in Department C and no time in Department D.Direct materials for the product cost $45 per unit,and direct labour is $20 per unit.
If the direct method of allocation is used and the company follows its usual pricing policy,what would be the selling price of the product?

A)$102.00
B)$111.00
C)$115.00
D)$161.00

Question 49

Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of departments X and Y are $27,000 and $45,000, respectively.
Data on standard service hours and number of employees are as follows:
$\begin{array}{lrrrr}&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \\& \underline{\text { Dept. }} & \underline{\text { Dept. }} & \underline{\mathrm{X}} & \underline{\mathrm{Y}}\\\text { Standard service hours used } & 200 & 150 & 1,200 & 600 \\\text { Number of employees } & 25 & 50 & 75 & 75 \\\text { Direct labour hours } & 250 & 250 & 1.000 & 500\end{array}$
Predetermined overhead rates for departments X and Y,respectively,are based on direct labour hours.

-Refer to the figure.What is the overhead rate for Department Y assuming the direct method is used?

A)$81.75
B)$90.00
C)$163.50
D)$187.50

Question 50

A company incurred $40,000 of common fixed costs and $60,000 of common variable costs.These costs are to be allocated to Departments A and B.Data on capacity provided and capacity used are as follows: $$\begin{array} { c c c } & \text { Capacity Provided } & \text { Capacity Used } \\ \text { Department }& \text { in Hours } & \text { in Hours } \\\text { A }& 400 & 320 \\\text { B } & 240 & 320\end{array}$$ Assume that both fixed and variable costs are allocated on the basis of capacity used.What are the fixed and variable costs allocated to Department A?
$\begin{array}{lll}&&\text { Fixed}&\text { Variable }\end{array}$

A) $\begin{array}{lll}& \$ 20,000 & \$ 30,000 \\\end{array}$
B) $\begin{array}{lll} & \$ 20,000 & \$ 37,500 \\\end{array}$
C) $\begin{array}{lll} & \$ 25,000 & \$ 30,000 \\\end{array}$
D) $\begin{array}{lll}& \$ 25,000 & \$ 37,500\end{array}$

Question 51

Morris Manufacturing Company has two support departments,Maintenance Department and Personnel Department,and two producing departments,X and Y.The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $4,500 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $9,000 and $15,000,respectively. Data on standard service hours and number of employees are as follows:
$\begin{array}{lcccc} & \text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \\& \underline{\text { Dept. }} & \underline{\text { Dept. }} & \underline{\mathbf{X}} & \underline{\mathbf{Y}} \\\text { Standard service hours used } & 100 & 75 & 600 & 300 \\\text { Number of employees } & 50 & 100 & 150 & 150 \\\text { Dirert lahnur houre }& 125 & 125 & 500 & 250\end{array}$



- What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?

A)$15,000
B)$17,250
C)$25,000
D)$27,250

Question 52

What should fixed support department costs allocation be based on?

A)current actual usage of service
B)current budgeted usage of service
C)practical capacity of user departments
D)actual capacity of user departments

Question 53

The following information pertains to Utter Company: Utter 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 labour hours.

-
What is the amount of maintenance costs allocated to the Assembly Department using the direct method (rounded to the nearest dollar)?

A)$14,400
B)$28,800
C)$38,160
D)$48,000

Question 54

Newton Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $120,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $18,000 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:
$$\begin{array} { l c c c c } & \text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept. } \\& \text { Dept. } & \text { Dept. } & \text { P1 } & \text { p2 } \\\text { Standard service hours used } & 400 & 200 & 1,200 & 600 \\\text { Number of emplayes }& 20 & 40 & 180 & 180 \\\text { Direct labour hours } & 200 & 200 & 1,000 & 1,000\end{array}$$


-Refer to the figure.What are the total overhead costs associated with P1 after allocating the Maintenance and Personnel Departments using the direct method?

A)$18,000
B)$36,000
C)$120,000
D)$125,000

Question 55

Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of departments X and Y are $27,000 and $45,000, respectively.
Data on standard service hours and number of employees are as follows:
$\begin{array}{lrrrr}&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \\& \underline{\text { Dept. }} & \underline{\text { Dept. }} & \underline{\mathrm{X}} & \underline{\mathrm{Y}}\\\text { Standard service hours used } & 200 & 150 & 1,200 & 600 \\\text { Number of employees } & 25 & 50 & 75 & 75 \\\text { Direct labour hours } & 250 & 250 & 1.000 & 500\end{array}$
Predetermined overhead rates for departments X and Y,respectively,are based on direct labour hours.

-Refer to the figure.What is the overhead rate for Department X assuming the direct method is used?

A)$27.00
B)$46.88
C)$81.00
D)$93.75

Question 56

Jin Manufacturing prices its products at full cost plus 30 percent.The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square metres,and Support Department B's costs are allocated based on number of employees.
Department C uses direct labour hours to assign overhead costs to products,while Department D uses machine hours.
One of the products the company produces requires 4 direct labour hours per unit in Department C and no time in Department D.Direct materials for the product cost $180 per unit,and direct labour is $80 per unit.
If the direct method of allocation is used and the company follows its usual pricing policy,what would be the selling price of the product?

A)$260.00
B)$332.00
C)$431.60
D)$468.00

Question 57

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

A)$5,000
B)$70,000
C)$75,000
D)$145,000

Question 58

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs.These costs are to be allocated to Departments XX and YY.Data on capacity provided and capacity used are as follows: $$\begin{array} { c c c } & \text { Capacity Pravided } & \text { Capacity Used } \\\text { Department }& \text { in Hours } & \text { in Hours } \\ \text { XX } & 500 & 400\\\text { YY }&300&400\end{array}$$
Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used.What are the fixed and variable costs allocated to Department XX?
$$\text { Fixed \quad\quad\quad Variable }$$

A)$60,000 $90,000
B)$60,000 $112,500
C)$75,000 $90,000
D)$75,000 $112,500

Question 59

Plants Company has two support departments (S1 and S2)and two producing departments (P1 and P2).Department S1 costs are allocated on the basis of number of employees,and Department S2 costs are allocated on the basis of space occupied expressed in square metres. Data on direct department costs,number of employees,and space occupied are as follows:
$\begin{array}{|l|c|c|c|c|}\hline & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \\\hline \text { Direct dept. costs } & \$ 7,500 & \$ 11,000 & \$ 27,500 & \$ 30,000 \\\hline \text { Number of employees } & 10 & 5 & 20 & 25 \\\hline \text { Space occupied (sq. metres) } & 1,000 & 500 & 1,500 & 2,500 \\\hline\end{array}$ If Plants uses the direct method,what would be the ratio representing the portion of Department S2 allocated to P1?

A)1,500/2,000
B)1,500/4,000
C)1,500/5,000
D)1,500/5,500

Question 60

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs.These costs are to be allocated to Departments XX and YY.Data on capacity provided and capacity used are as follows: $$\begin{array} { c c c } & \text { Capacity Pravided } & \text { Capacity Used } \\\text { Department }& \text { in Hours } & \text { in Hours } \\ \text { XX } & 500 & 400\\\text { YY }&300&400\end{array}$$

Assume that both fixed and variable costs are allocated on the basis of capacity used.What are the fixed and variable costs allocated to Department XX?
$\begin{array}{llcc} &\text { Fixed } & \text {Variable } \\\end{array}$

A) $\begin{array}{llcc}\$ 60,000 & \$ 90,000 \\\end{array}$
B) $\begin{array}{llcc} \$ 60,000 & \$ 112,500\\\end{array}$
C) $\begin{array}{llcc} \$ 75,000 & \$ 90,000\\\end{array}$
D) $\begin{array}{llcc} \$ 75,000& \$ 112,500 \\\end{array}$

Question 61

Rust 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.

-Refer to the figure.What are the total costs to be allocated from Department S1?

A)$800
B)$9,500
C)$15,000
D)$15,573

Question 62

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.Using the sequential method,if the support department with the highest percentage of interdepartmental service is allocated first,what is the cost of the support departments allocated to Department P1?

A)$12,750
B)$20,295
C)$21,750
D)$24,000

Question 63

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.Using the direct method,what is the cost of the Personnel Department allocated to Department P1?

A)$2,132
B)$2,250
C)$2,700
D)$4,500

Question 64

Savings Bank has three revenue-generating departments: Chequing accounts, Savings Accounts, and Loans. The bank also has three service areas: Administration, Personnel, and Accounting. The direct costs per month and the interdepartmental service structure are shown below:
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Percentage of Service Used by }$
$\begin{array}{l|c|c|c|c|c|c|c}\hline \text { Dept. } & \text { Costs } & \text { Admin. } & \text { Pers. } & \text { Acctg. } & \text { Cheq. } & \text { Sav. } & \text { Loans } \\\hline \text { Administration } & \$ 40,000 & - & 10 & 10 & 40 & 20 & 20 \\\hline \text { Personnel } & 23,000 & 10 & - & 10 & 20 & 40 & 20 \\\hline \text { Accounting } & 30,000 & 10 & 10 & - & 20 & 20 & 40 \\\hline \text { Chequing } & 41,000 & & & & & & \\\hline \text { Savings } & 25,000 & & & & & & \\\hline \text { Loans } & 16,000 & & & & & &\\\hline \end{array}$


-Refer to the figure.Savings Bank uses the sequential (step)method and the service departments are allocated in the following order: administration,personnel,and accounting.How much cost would be allocated to the loan area from the personnel department using the sequential/step method (rounded to two decimal places)?

A)$4,600.00
B)$5,111.11
C)$6,000.00
D)$7,666.67

Question 65

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel departments using the direct method?

A)$15,000
B)$25,000
C)$27,250
D)$37,250

Question 66

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.What is the combined total department costs for the producing departments after allocation of the support departments?

A)$24,000
B)$26,000
C)$34,500
D)$58,500

Question 67

Staff Company allocates common Building Department costs to producing departments (P1 and P2)based on space occupied,and it allocates common Personnel Department costs based on the number of employees.Space occupancy and employee data are as follows: $\begin{array}{lcccc}&\text { Building } &\text { Persomel } &\text { Dept. P1 } &\text { Dept. P2 }\\\text { Space occupied } & 2,000 \mathrm{~m} & 10,000 \mathrm{~m} & 120,000 \mathrm{~m} & 70,000 \mathrm{~m} \\\text { Employees } & 6 & 10 & 80 & 50\end{array}$
If Staff Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first,what is the ratio representing the portion of Personnel Department costs allocated to Department P2?

A)50/130
B)50/140
C)50/146
D)90/140

Question 68

Which of the following allocation methods fully recognizes services that support departments provide to each other?

A)direct method
B)sequential method
C)reciprocal method
D)multi-step method

Question 69

Which of the following would NOT be a criterion used to rank departments to determine the order of allocation under the sequential method?

A)Rank the supporting departments in order of the amount of service rendered,from the greatest to the least.
B)Rank the supporting departments in order of the support services rendered,measured by the direct costs of each support department with the department with the highest cost rendering the greatest service.
C)Determine the total cost of a support department,both direct and allocated from other support departments,before ranking.
D)Rank the supporting departments based on a percentage of service they render to other service departments.

Question 70

Plants Company has two support departments (S1 and S2)and two producing departments (P1 and P2).Department S1 costs are allocated on the basis of number of employees,and Department S2 costs are allocated on the basis of space occupied expressed in square metres. Data on direct department costs,number of employees,and space occupied are as follows:
$\begin{array}{lrrrr}&\text { S 1}& \text { S 2} &\text { P 1} &\text { P 2}\\\text { Direct dept. costs } & \$ 7,500 & \$ 11,000 & \$ 27,500 & \$ 30,000 \\\text { Number of employees } & 10 & 5 & 20 & 25 \\\text { Space occupied (sq. metres.) } & 1,000 & 500 & 1,500 & 2,500\end{array}$
When Plants uses the sequential method,the support department allocated first is the one with the highest percentage of interdepartmental service.The choice of the department allocated first is determined by the comparison of which of the following sets of ratios for S1 and S2,respectively?

A)5/50; 1,000/5,000
B)5/60; 1,000/5,500
C)10/50; 1,000/5,000
D)10/55; 500/4,500

Question 71

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.Using the direct method,what is the cost of the Maintenance Department allocated to Department P1?

A)$10,000
B)$15,000
C)$20,000
D)$30,000

Question 72

Savings Bank has three revenue-generating departments: Chequing accounts, Savings Accounts, and Loans. The bank also has three service areas: Administration, Personnel, and Accounting. The direct costs per month and the interdepartmental service structure are shown below:
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Percentage of Service Used by }$
$\begin{array}{l|c|c|c|c|c|c|c}\hline \text { Dept. } & \text { Costs } & \text { Admin. } & \text { Pers. } & \text { Acctg. } & \text { Cheq. } & \text { Sav. } & \text { Loans } \\\hline \text { Administration } & \$ 40,000 & - & 10 & 10 & 40 & 20 & 20 \\\hline \text { Personnel } & 23,000 & 10 & - & 10 & 20 & 40 & 20 \\\hline \text { Accounting } & 30,000 & 10 & 10 & - & 20 & 20 & 40 \\\hline \text { Chequing } & 41,000 & & & & & & \\\hline \text { Savings } & 25,000 & & & & & & \\\hline \text { Loans } & 16,000 & & & & & &\\\hline \end{array}$


-Refer to the figure.How much cost would be allocated to the Savings Account area from Administration using the direct method?

A)$5,000
B)$10,000
C)$20,000
D)$40,000

Question 73

Which of the following allocation methods assumes "step-down" interdepartmental services?

A)direct method
B)sequential method
C)reciprocal method
D)total cost method

Question 74

Oaks 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:
$\begin{array}{lrrr}&\text { MD}&\text { PD}&\text { P1}&\text { P2}\\\text { Standard service hours used } & 100 & 50 & 300 &150\\\text { Number of employees } & 10 & 20 & 90&90\\\\\text { Direst lahour houre }&50&50&250&250\end{array}$


-Refer to the figure.Using the sequential method,if the support department with the highest percentage of interdepartmental service is allocated first,what is the cost of the Maintenance Department allocated to Department P1?

A)$4,500
B)$18,000
C)$20,000
D)$30,000

Question 75

Lopez Manufacturing prices its products at full cost plus 40 percent.The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Department A's costs are allocated based on square metres,and Support Department B's costs are allocated based on number of employees.Department C uses direct labour hours to assign overhead costs to products,while Department D uses machine hours.
One of the products the company produces requires 4 direct labour hours per unit in Department C and no time in Department D.Direct materials for the product cost $45 per unit,and direct labour is $20 per unit.
If the sequential method of allocation is used and the company follows its usual pricing policy,what would be the selling price of the product (with allocations rounded to the nearest whole dollar and the costs per unit rounded to two decimal places)?

A)$108.46
B)$113.52
C)$159.38
D)$162.52

Question 76

Rust 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.

-Refer to the figure.What are the total costs to be allocated from Department S2?

A)$900
B)$8,000
C)$9,557
D)$15,573

Question 77

Kraft,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:
$\begin{array}{lr}\text { Support department hours used: }\\\text { Department X } & 12,000 \\\text { Department Y } & \underline{4,000} \\\text { Total hours } & \underline{16,000}\\\\\text { Support department costs: }\\\text { Actual support department costs } & \$ 48,000 \\\text { Budgeted fixed department costs } & \$ 20,000 \\\text { Budgeted variable rate per hour } & \$ 2.50\end{array}$

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,what are support department costs allocated to Department X?

A)$36,000
B)$36,400
C)$40,000
D)$45,000

Question 78

Kraft,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:
$\begin{array}{lr}\text { Support department hours used: }\\\text { Department X } & 12,000 \\\text { Department Y } & \underline{4,000} \\\text { Total hours } & \underline{16,000}\\\\\text { Support department costs: }\\\text { Actual support department costs } & \$ 48,000 \\\text { Budgeted fixed department costs } & \$ 20,000 \\\text { Budgeted variable rate per hour } & \$ 2.50\end{array}$
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 product costing,what are the support department costs allocated to Department X?

A)$20,000
B)$20,400
C)$24,800
D)$30,000

Question 79

Rust 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.


-Refer to the figure.What is S1's cost equation?

A)S1 = $8,000 + 0.06S2
B)S1 = $8,000 + 0.10S2
C)S1 = $15,000 + 0.06S2
D)S1 = $15,000 + 0.10S2

Question 80

Rust 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.

-Refer to the figure.What is S2's cost equation?

A)S2 = $8,000 + 0.06S1
B)S2 = $8,000 + 0.10S1
C)S2 = $15,000 + 0.06S1
D)S2 = $15,000 + 0.10S1