Question 1

Which of the following is not a reason that costs of operating service departments are allocated to other departments?

Accepted Answer

A)  Many departments consume the services provided by service departments and should be assigned a share of the costs associated with the services consumed.
B)  Allocating service costs to other departments for services provided gives department managers incentives to control the use of support services.
C)  External reporting regulations (for tax and financial reporting) require allocating manufacturing overhead to the units produced.
D)  Many departments consume the services provided by service departments and should be charged an arbitrary share of the costs because the costs must be allocated to someone. D

Question 2

Evans Company processes a chemical,Exacto 7,through a pressure treatment operation.The complete process has two outputs,X and Y.The January costs to process Exacto 7 are $50,000 for materials and $100,000 for conversion costs.This processing results in two outputs,X and Y,that sell for a total of $250,000.The sales revenue from X amounts to $200,000 of the total.
Required:
Using the net realizable method,assign costs to X and Y for January.
Total joint costs are $150,000 (based on the $50,000 materials plus $100,000 conversion).These costs are allocated as follows:

Accepted Answer

To Output X:
$200,000/$250,000 X $150,000 = $120,000
To Output Y:
($250,000 - $200,000)/$250,000 X $150,000 = $30,000

Question 3

What is the nature of common (or indirect)costs?

Accepted Answer

A common or indirect cost results from the joint use of a facility or a service by several products,departments,or processes.

Question 4

Marketing and administrative costs are allocated to departments for purposes of performance evaluation using techniques

Accepted Answer

A)  similar to those employed in allocating service department costs.
B)  different than those employed in allocating service department costs.
C)  similar to those employed in allocating production department costs.
D)  different than those employed in allocating common department costs.

Question 5

Columbia Hospital for Women charges for labor and delivery room overhead based on hours of use.The following data represents the annual budget for the labor and delivery room:

The total hours of labor and delivery room care expected for the year is 300,000 hours.If a patient spends 4 hours in the labor and delivery room,what is the total overhead costs that would be charged?

Accepted Answer

A)  $80.00
B)  $40.00
C)  $20.00
D)  $ 4.00

Question 6

Why bother allocating joint-process costs?

Accepted Answer

A)  It is a performance measurement.
B)  It is used in resolving contractual disputes.
C)  It is used for estimating casualty losses
D)  All of the answers are correct.

Question 7

Which of the following is the process by which the costs of operating the human resources,accounting,computer support,and maintenance departments are allocated to other departments?

Accepted Answer

A)  direct department cost allocation.
B)  producing department cost allocation.
C)  service department cost allocation.
D)  common department cost allocation.

Question 8

Stephanie Company
Stephanie Company has two production departments: D and J.Stephanie also has 3 service departments: Personnel,Administration,and Shipping.Shipping costs are allocated on the basis of number of packages,while Personnel and Administration costs are allocated using number of employees.Assume that the ranking of the benefits provided is in the order listed below.

Refer to Stephanie Company.Using the direct method,what amount of personnel costs is allocated to Department D (rounded to the nearest $)?

Accepted Answer

A)  $ 73,171
B)  $240,000
C)  $300,000
D)  $333,333

Question 9

Costs of operating the human resources,accounting,computer support,and maintenance departments are allocated to other departments.All are examples of which of the following?

Accepted Answer

A)  direct departments.
B)  producing departments.
C)  service departments.
D)  common departments.

Question 10

Transtech,Inc. ,processes silicon crystals into purified wafers and chips.Silicon crystals cost $60,000 per tank-car load.The process involves heating the crystals for 12 hours,producing 45,000 purified wafers with a market value of $20,000,and 15,000 chips with a market value of $140,000.The joint cost of the heat process is $25,600.
Required:
a.If the crystal costs and the heat process costs are to be allocated on the basis of units of output,what cost is assigned to each product?
b.If the crystal costs and the heat process costs are allocated on the basis of the net realizable value,what cost is assigned to each product?
c.How much profit or loss does the purified wafers product provide using the data in this problem and your analysis in requirement a.? Is it really possible to determine which product is more profitable? Explain why or why not.

Accepted Answer

The answer of Transtech,Inc. ,processes silicon crystals into purified wafers...

Question 11

Stephanie Company
Stephanie Company has two production departments: D and J.Stephanie also has 3 service departments: Personnel,Administration,and Shipping.Shipping costs are allocated on the basis of number of packages,while Personnel and Administration costs are allocated using number of employees.Assume that the ranking of the benefits provided is in the order listed below.

Refer to Stephanie Company.Using the direct method,what amount of Shipping costs is allocated to Department D (rounded to the nearest $)?

Accepted Answer

A)  $ 63,636
B)  $318,182
C)  $381,818
D)  $450,000

Question 12

Big Farms LLC has two production departments (Planting and Harvesting)and two service departments (Cafeteria and Repairs. )The service department's costs must be allocated to production departments.Management has decided to allocate the cost of the cafeteria to other departments based upon the average number of employees and the cost of the Repairs Department based upon the number of machine hours used.
  
Regardless of the allocation method used,Big Farm always starts the allocation process with the Cafeteria Department.
If Big Farm uses the step method,what additional overhead costs should be allocated from the service departments to the Planting Department?

Accepted Answer

The answer of Big Farms LLC has two production departments...

Question 13

Clark Company has two production departments,Tubing and Packing,and two service departments,Quality Control and Maintenance.In June,the Quality Control department provided 2,000 hours of service- 1,047 hours to Tubing,255 hours to Maintenance,and 698 hours to Packing.In the same month,Maintenance provided 3,240 hours to Tubing,1,890 hours to Packing,and 270 hours to Quality Control.Quality Control incurred costs of $100,000,and Maintenance incurred costs of $220,000.
Required:
Use the step method to allocate service department costs sequentially based on hours of service provided.Start with Maintenance and then allocate Quality Control.Check your solution by making certain that the firm finally allocates $320,000 to the production departments.

Accepted Answer

The answer of Clark Company has two production departments,Tubing and...

Question 14

The products that result from processing a common input in the forest products,oil and gas,chemicals and mining industries are called

Accepted Answer

A)  natural products.
B)  common products.
C)  joint products.
D)  environmentally-sound products.

Question 15

Useful Tool Company
Useful Tool Company has two service departments (General Factory and Repair)and two operating departments (Fabrication and Assembly).Management has decided to allocate repair costs on the basis of the area (square feet)in each department and to allocate General Factory on the basis of labor hours worked by the employees in each of their respective departments.
The following data appear in the company records for the current period:
  
The company allocates the costs from the General Factory Department first.
Refer to the Useful Tool Company.Using the direct method,what is the total amount of costs allocated to (a)the Fabrication Department and (b)the Assembly Department?

Accepted Answer

The answer of Useful Tool Company
Useful Tool Company has two...

Question 16

Pricing and bidding,contract cost reimbursement,and motivation are reasons for

Accepted Answer

A)  allocating common costs to departments and products.
B)  allocating common costs to service departments,only.
C)  not allocating common costs to departments and products.
D)  not allocating common costs to production departments.

Question 17

Which of the following statements is true concerning the net realizable value method of joint-process costing?

Accepted Answer

A)  The method implies a matching of output costs with revenues generated by each input.
B)  The method implies a matching of input costs with revenues generated by each output.
C)  The method implies a matching of input revenues with costs generated by each output.
D)  the method implies a matching of output costs with revenues generated by each input.

Question 18

Net realizable value and physical measures are two methods for allocating which of the following costs?

Accepted Answer

A)  direct costs.
B)  opportunity costs.
C)  joint-process costs.
D)  sunk costs.

Question 19

Which of the following terms describes a cost that firms can identify specifically with,or trace directly to,a particular product,department,or process?

Accepted Answer

A)  direct cost.
B)  process cost.
C)  marginal cost.
D)  variable cost.

Question 20

What is the second step in allocating service department costs to production departments?

Accepted Answer

A)  Assign overhead costs that are directly attributable to a service or production department.
B)  Allocate other overhead costs based on appropriate cost drivers.
C)  Allocate service department costs to production departments.
D)  None of the answers is correct.

Exam 13: Allocating Costs to Responsibility Centers