Deck 7: Allocating Costs of Support Departments and Joint Products

Question 1

Rules of financial reporting (GAAP) require

A) that only direct manufacturing costs be assigned to products.
B) that only producing department costs be assigned to products.
C) that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products.
D) that only indirect manufacturing costs be assigned to products.

Answer 1

C

Question 2

What is one of the potential disadvantages of NOT 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 more efficient level

Answer 2

B

Question 3

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

A) personnel
B) maintenance
C) purchasing
D) both a and b

Answer 3

B

Question 4

The Zink Company assigns plant administration costs to the production departments based on the number of employees.Which of the following would NOT be a good combination of common costs with an activity driver?

A) personnel department costs based on number of employees
B) purchasing department costs based on machine hours
C) cafeteria costs based on meals served
D) warehouse costs based on the value of materials stored

Question 5

Examples of producing departments include all of the following EXCEPT

A) mixing.
B) molding.
C) packaging.
D) accounting.

Question 6

A possible causal factor to use when allocating cafeteria costs would be

A) number of square feet.
B) number of direct labor hours.
C) number of employees.
D) appraised value of square footage.

Question 7

_______________ are 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 8

Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization?

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

Question 9

A common cost occurs

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 10

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 11

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 12

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

A) machine hours
B) direct labor hours
C) number of employees
D) square feet

Question 13

Which of the following departments is NOT a support department?

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

Question 14

Support departments

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

Question 15

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

A) machine hours
B) direct labor hours
C) number of employees
D) square feet

Question 16

Examples of support departments include all of the following EXCEPT

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

Question 17

If the costs of support departments are NOT allocated to producing departments,

A) product costs would be understated.
B) GAAP requirements would not be met.
C) managers of producing departments may tend to overconsume services.
D) all of these.

Question 18

The major objective(s) of allocations are

A) to motivate managers.
B) to compute product line profitability.
C) to value inventory.
D) all of these.

Question 19

Support department costs are _______________ to the producing departments.

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

Question 20

Support department costs are accounted for in which one of the following ways?

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 21

Figure 7-3 Wilson and Lewis, a large law firm, utilizes an internal centralized printing center 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 Figure 7-3.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 $85,000.
B) The printing department would expect to incur costs of $82,790.
C) Any extra amount charged is due to the fixed costs being charged as if they were variable costs.
D) All of these.

Question 22

Which of the following is NOT a benefit 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 out-sourcing all support services.

Question 23

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

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) All of these

Question 24

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

A) Actual rate ´ Actual usage.
B) Actual rate ´ Budgeted usage.
C) Budgeted rate ´ Actual usage.
D) Budgeted rate ´ Budgeted usage.

Question 25

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

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

Question 26

Figure 7-3 Wilson and Lewis, a large law firm, utilizes an internal centralized printing center 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 Figure 7-3.Assuming a single charging rate is used, what would be the charge per page? (round to the nearest cent)

A) $.04
B) $.25
C) $.21
D) none of these amounts

Question 27

Figure 7-1 Yo Department Store incurred $4,000 of indirect advertising costs for its operations.The following data has been collected for 2011 for its three departments:


- Refer to Figure 7-1.How much of the indirect advertising costs will be allocated to the Shoes Department if newspaper ad space is the activity driver?

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

Question 28

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year:


-
Refer to Figure 7-2.Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.

A) 12.5%; $34
B) 19.6%; $34
C) 18.2%; $34
D) 19%; $34
E) none of these

Question 29

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year:


-

Refer to Figure 7-2.Using a single charging rate, determine the rate per trip.

A) $256
B) $290
C) $295
D) $261
E) $34

Question 30

FIGURE 7-5 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 center 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:


-Refer to Figure 7-5.Support department costs NOT allocated to the two copy centers are

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

Question 31

FIGURE 7-4 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 center 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:


- Refer to Figure 7-4.Support department costs NOT allocated to the two copy centers are

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

Question 32

Figure 7-3 Wilson and Lewis, a large law firm, utilizes an internal centralized printing center 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 Figure 7-3.If the Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (round to the nearest cent)

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

Question 33

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

A) Actual rate ´ Actual usage.
B) Actual rate ´ Budgeted usage.
C) Budgeted rate ´ Actual usage.
D) Budgeted rate ´ Budgeted usage.

Question 34

FIGURE 7-4 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 center 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:


-Refer to Figure 7-4.For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are

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

Question 35

FIGURE 7-4 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 center 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:


- Refer to Figure 7-4.For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are

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

Question 36

Figure 7-1 Yo Department Store incurred $4,000 of indirect advertising costs for its operations.The following data has been collected for 2011 for its three departments:


-Refer to Figure 7-1.How much of the indirect advertising costs will be allocated to the Cosmetics Department if direct advertising costs is the activity driver?

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

Question 37

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year:


-
Refer to Figure 7-2.Using a single charging rate, how much will be charged to the West Sales Territory?

A) $29,000
B) $31,900
C) $29,500
D) $28,160
E) none of these

Question 38

FIGURE 7-5 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 center 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:


- Refer to Figure 7-5.For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are

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

Question 39

Figure 7-2 Alpha Company's travel department had the following budgeted costs for the coming year:


-
Refer to Figure 7-2.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? (round to the nearest dollar)

A) $31,498
B) $21,320
C) $29,492
D) $30,638
E) none of these

Question 40

FIGURE 7-5 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 center 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:


- Refer to Figure 7-5.For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are

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

Question 41

Figure 7-6 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:


- Refer to Figure 7-6.Using the direct method, the cost of the Personnel Department allocated to Department P1 is

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

Question 42

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 feet. Data on direct department costs, number of employees, and space occupied are as follows:
If Plants uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

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

Question 43

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 labor hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

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

Question 44

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: 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.The fixed and variable costs allocated to Department XX are

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

Question 45

Figure 7-6 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:


- Refer to Figure 7-6.Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the Maintenance Department allocated to Department P1 is

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

Question 46

Basic guidelines that should be followed when allocating support department costs include

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) both a and b.

Question 47

Figure 7-6 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:


- Refer to Figure 7-6.What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

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

Question 48

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 labor hours.(Round amounts to dollars.)
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

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

Question 49

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:
Normal support department usage is 8,000 hours each for Department X and Department Y.

-Assuming the direct method is used and the purpose is performance evaluation, support department costs allocated to Department X are

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

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: Assume that both fixed and variable costs are allocated on the basis of capacity used.The fixed and variable costs allocated to Department A are

A) $25,000 $37,500
B) $25,000 $30,000
C) $20,000 $37,500
D) $20,000 $30,000

Question 51

Figure 7-6 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:


-Refer to Figure 7-6.What is the combined total department costs for the producing departments after allocation of the support departments?

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

Question 52

Figure 7-6 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:


- Refer to Figure 7-6.Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to Department P1 is

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

Question 53

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

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

Question 54

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:
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, support department costs allocated to Department X are

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

Question 55

Which of the following methods allocates support department costs?

A) direct allocation method
B) reciprocal allocation method
C) sequential allocation method
D) all of these

Question 56

Fixed support department costs should be allocated based on

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

Question 57

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: 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.The fixed and variable costs allocated to Department A are

A) $25,000 $37,500
B) $25,000 $30,000
C) $20,000 $37,500
D) $20,000 $30,000

Question 58

Figure 7-6 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:


- Refer to Figure 7-6.Using the direct method, the cost of the Maintenance Department allocated to Department P1 is

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

Question 59

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: If Staff Company uses the direct allocation method, the ratio representing the portion of building costs allocated to Department P1 is

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

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: Assume that both fixed and variable costs are allocated on the basis of capacity used.The fixed and variable costs allocated to Department XX are

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

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.

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

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

Question 62

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

A) direct method
B) sequential method
C) reciprocal method
D) all of these

Question 63

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 feet. Data on direct department costs, number of employees, and space occupied are as follows:
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 the following ratio for S1 and S2, respectively:

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

Question 64

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: If Staff Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is

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

Question 65

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) all of these

Question 66

Which of the following would NOT be a criteria used to rank departments to determine 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 67

Savings Bank of Lawrence has three revenue-generating departments: checking 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: The 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? (Round to two decimal places.)

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

Question 68

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 feet, and Support Department B's costs are allocated based on number of employees.Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours.
One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $45 per unit, and direct labor is $20 per unit.
If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be

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

Question 69

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.

-What is S2's cost equation?

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

Question 70

Jacob Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y.The Maintenance Department costs of $60,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $9,000 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $18,000 and $30,000, respectively. Data on standard service hours and number of employees are as follows:
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department Y assuming the direct method is used?

A) $218.00
B) $120.00
C) $250.00
D) $109.00

Question 71

Savings Bank of Lawrence has three revenue-generating departments: checking 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: 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 72

Jacob Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y.The Maintenance Department costs of $60,000 are allocated on the basis of standard service used.The Personnel Department costs of $9,000 are allocated on the basis of number of employees.The direct costs of Departments X and Y are $18,000 and $30,000, respectively. Data on standard service hours and number of employees are as follows:
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department X assuming the direct method is used?

A) $72.00
B) $232.00
C) $250.00
D) $125.00

Question 73

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.

- What is S1's cost equation?

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

Question 74

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:
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

-
What is the overhead rate for Department Y assuming the direct method is used?

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

Question 75

The following information pertains to Yoder Corporation:
Yoder Corporation does not divide costs into fixed and variable components.Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

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

Question 76

Quan Company has three support departments whose direct department costs are $20,000, $30,000, and $40,000, respectively, and two producing departments whose direct department costs are $400,000 and $360,000, respectively.The combined total department cost for the producing departments after allocation of the support departments is

A) $360,000.
B) $90,000.
C) $760,000.
D) $850,000.

Question 77

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:
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

-
What is the overhead rate for Department X assuming the direct method is used?

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

Question 78

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 feet, and Support Department B's costs are allocated based on number of employees.Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours.
One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for the product cost $45 per unit, and direct labor is $20 per unit.
If the sequential method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be (round service allocations to the nearest whole dollar and the costs per unit to two decimal places)

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

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.

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

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

Question 80

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 feet. Data on direct department costs, number of employees, and space occupied are as follows:
If Plants used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is

A) S1 = $7,500 + 0.10S2.
B) S1 = $10,000 + 0.20S2.
C) S1 = $7,500 + 0.20S2.
D) S1 = $10,000 + 0.10S2.