Question 1

Firm X has a production process that has a total joint cost of $15,000. At the split-off point, there are 2,000 pounds of Product 1 and 3,000 pounds of Product 2. What is the cost per pound of Product 1 using the physical measure method?

Accepted Answer

A) $2.50. 
B) $3.00. 
C) $3.50. 
D) $4.00.

Question 2

The amount of joint costs allocated to product Z using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $19,222. 
B) $35,000. 
C) $18,450. 
D) $28,496. 
E) $17,778.

Question 3

The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $100,000. 
B) $109,000. 
C) $126,000. 
D) $130,000. 
E) $135,000.

Question 4

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $1,000,125. 
B) $1,890,000. 
C) $689,875. 
D) $642,000. 
E) $923,000.

Question 5

The total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $102,222. 
B) $122,402. 
C) $127,778. 
D) $142,471. 
E) $150,050.

Question 6

The amount of joint costs allocated to product X using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $24,000. 
B) $21,333. 
C) $36,444. 
D) $40,842. 
E) $32,110.

Question 7

The total cost accumulated in the assembly department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $1,033,333. 
B) $1,690,000. 
C) $686,667. 
D) $646,667. 
E) $693,333.

Question 8

The amount of joint costs allocated to product X using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Accepted Answer

A) $20.000. 
B) $32,444. 
C) $40,000. 
D) $17,677. 
E) $15,000.

Question 9

An overhead cost that can be traced directly to either a service or production department:

Accepted Answer

A) Is called a "flow through" cost. 
B) Requires less allocation effort. 
C) Is charged directly to that department. 
D) Must be variable. 
E) Must be fixed.

Question 10

The departmental cost allocation approach is preferred when the firm has:

Accepted Answer

A) Homogeneous processes. 
B) Heterogeneous processes. 
C) Diverse products. 
D) Many production activities.

Question 11

Which one of the following methods uses units of output to allocate joint costs to joint products?

Accepted Answer

A) Net realizable value method. 
B) Physical units method. 
C) Net sales value method. 
D) Sales value at split-off method. 
E) Activity-based costing.

Question 12

The mathematical technique that underlies the reciprocal cost allocation method is:

Accepted Answer

A) Regression analysis. 
B) Simultaneous equations. 
C) Analysis of variances. 
D) Complex algebraic functions. 
E) Multiple correlation.

Question 13

Which of the following is not an ethical issue managers encounter with cost allocation?

Accepted Answer

A) Products that are produced for both a competitive market and a public agency. 
B) Governmental agency provides a free service to the public. 
C) Governmental agency reimburses the costs of a private institution. 
D) Costs of products sold to or from foreign subsidiaries.

Question 14

In making decisions about whether to sell or further process joint products, allocation of common or joint costs is:

Accepted Answer

A) Essential. 
B) Useful. 
C) Irrelevant. 
D) Is useful depending on the method chosen. 
E) Is the only way to get the true total product cost.

Question 15

Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service?

Accepted Answer

A) Direct method. 
B) Indirect method. 
C) Step method. 
D) Reciprocal method. 
E) Cross-functional method.

Question 16

When significant differences exist in costs allocated to production departments, cost management should use what method to find a more accurate cost allocation?

Accepted Answer

A) Reciprocal method. 
B) Step method. 
C) Direct method. 
D) None of the above.

Exam 7: Cost Allocation: Departments, Joint Products, and By-Products

Firm X has a production process that has a total joint cost of $15,000. At the split-off point, there are 2,000 pounds of Product 1 and 3,000 pounds of Product 2. What is the cost per pound of Product 1 using the physical measure method?

The amount of joint costs allocated to product Z using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :

The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar) :

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :

The total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :

The amount of joint costs allocated to product X using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :

The total cost accumulated in the assembly department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :

The amount of joint costs allocated to product X using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar) :