Question 1

Which of the following is a valid conclusion, in comparing the three allocation methods?

Accepted Answer

A)   The reciprocal method is conceptually inferior.
B)   The direct method is viewed as too complex by most organizations.
C)   The step-down method is viewed as too complex by most organizations.
D)   Many managers find the step-down method too simple.
E)   Many managers find the reciprocal method difficult to understand.F) B) and D)
G) A) and C)

Question 2

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

Accepted Answer

The method of using actual rates based o...

Question 3

Answer the following questions using the information below:
The Bonawitz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:
  Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies.
-If a single-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

Accepted Answer

A)   $8,400
B)   $9,000
C)   $6,000
D)   $4,800
E)   $6,655F) B) and D)
G) D) and E)

Question 4

Answer the following questions using the information below:
Betty's Book and Music Store has two service departments, Warehouse and Data Centre. Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours. Data Centre Department costs of $75,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $125,000 and $150,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
 
-Using the step-down method, what amount of Data Centre Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Accepted Answer

A)   $25,000
B)   $75,000
C)   $7,500
D)   $0
E)   $17,500F) C) and D)
G) A) and E)

Question 5

Which of the following describes the complete reciprocated cost?

Accepted Answer

A)   It only includes the actual incurred cost of the operations department.
B)   It only includes the actual incurred cost of the support department.
C)   It is always larger than actual cost.
D)   It is always less than actual cost.
E)   It is equal to the actual cost of a single service department.F) D) and E)
G) None of the above

Question 6

Use the information below to answer the following question(s) .
We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used.
  For both departments, common fixed costs are to be allocated on the basis of capacity provided and common variable costs are to be allocated on the basis of capacity used.
-The fixed and variable costs allocated to the Sauna Department are

Accepted Answer

A)   $50,000 and $75,000, respectively.
B)   $50,000 and $60,000, respectively.
C)   $30,000 and $75,000, respectively.
D)   $30,000 and $50,000, respectively.
E)   $30,000 and $60,000 respectivelyF) C) and D)
G) B) and C)

Question 7

Benefits of the single-rate method include

Accepted Answer

A)   the low cost of implementation.
B)   fixed costs that are transformed into variable costs for user decision making.
C)   signals regarding how variable and fixed costs behave differently.
D)   information that leads to outsourcing decisions that benefit the organization as a whole.
E)   there is a stronger cause and effect relationship.F) A) and D)
G) B) and E)

Question 8

The cost pool is homogeneous if all included activities have the same or similar cause-and-effects or benefits received relationships between the cost driver and the costs of the activity.

Accepted Answer

A) True 
 B)False

Question 9

Fixed costs

Accepted Answer

A)   should be allocated according to past production capacity.
B)   should be allocated according to current usage.
C)   should be allocated according to short-term expected usage.
D)   should be allocated according to long-term expected usage.
E)   should be allocated using actual usage as the allocation base.F) C) and E)
G) A) and D)

Question 10

Use the information below to answer the following question(s) .
Data Source Media manufactures cassettes and CDs. Management is attempting to set the budget for the coming year. Two divisions (Cassette and CD)  of the company utilize one plant location. The following data have been prepared for review.
 
-What is the allocated cost to the two departments, respectively, if budgeted usage is the base for fixed costs and actual usage is the base for variable costs? (Use dual-rate method.)  Assume that the Cassette and CD Departments used 1,750 and 200 hours, respectively.

Accepted Answer

A)   $1,050,000; $120,000
B)   $1,787,240; $204,256
C)   $1,815,957; $254,043
D)   $2,000,126; $294,112
E)   $1,787,240; $254,043F) C) and D)
G) C) and E)

Question 11

An electronics manufacturer is trying to encourage its engineers to design simpler products so that overall costs are reduced.
Required:
Which of the value-chain function costs (R&D, design, production, marketing, distribution, customer service) should be included in product-cost estimates to achieve the above purpose? Why?

Accepted Answer

All costs that are affected by...

Question 12

An organization determines its allocation base depending upon which of the following factors?

Accepted Answer

A)   the purpose served by the cost allocation base
B)   the size of the base
C)   the number of different items in the base
D)   the performance of the denominator activity
E)   benchmarking competitor processesF) A) and B)
G) B) and C)

Question 13

The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.

Accepted Answer

A) True 
 B)False

Question 14

A cost pool is a grouping of individual cost items.

Accepted Answer

A) True 
 B)False

Question 15

Use the information below to answer the following question(s) .
We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used.
  For both departments, common fixed costs are to be allocated on the basis of capacity provided and common variable costs are to be allocated on the basis of capacity used.
-The fixed and variable costs allocated to the Barbell Department are

Accepted Answer

A)   $50,000 and $75,000, respectively.
B)   $50,000 and $60,000, respectively.
C)   $30,000 and $75,000, respectively.
D)   $30,000 and $60,000, respectively.
E)   $30,000 and $50,000 respectively.F) A) and B)
G) A) and C)

Question 16

Cutler Hammer currently utilizes a manufacturing facility for $200,000 per year. The facility is used at 70 percent capacity. The shipping department has proposed a plan in which it would utilize the other 30 percent plant capacity for the company's shipping plus handling the shipping of several nearby businesses. The company's consulting firm estimated that the overall costs of maintaining the space would increase by 12 percent. The shipping manager is interested in the amount that would be allocated under the stand-alone method.

Accepted Answer

A)   $70,000
B)   $140,000
C)   $84,000
D)   $156,800
E)   $67,200F) A) and D)
G) A) and C)

Question 17

Use the information below to answer the following question(s) .
John, owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The following data from operations were collected for analysis.
Budgeted manufacturing overhead costs:
  Service furnished:
By Plant Maintenance (budgeted labour hours) 
  By Data Processing (budgeted computer time) 
 
-Which of the following linear equations would represent the complete reciprocated cost of the Data Processing department?

Accepted Answer

A)   DP = $75,000 + (600/4,700) PM
B)   DP = $75,000 + (3,500/16,700) PM
C)   DP = $75,000 × (600/4,800)  + $350,000 × (3,340/16,700) 
D)   PM = $350,000 + (600/16,700) DP
E)   PM =$75,000 × (600/4,700)  + $350,000 × (3,340/16,700) F) A) and B)
G) C) and D)

Question 18

When using the causality criterion, cost drivers are selected as the cost allocation bases.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true concerning cost allocation in a multi-product company?

Accepted Answer

A)   Where the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
B)   Where the indirect costs are fixed and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
C)   Where the indirect costs are variable and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
D)   Where the indirect costs are fixed and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
E)   Where the indirect costs are variable and the products are produced jointly, it is not possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred.F) B) and E)
G) C) and E)

Question 20

When all of a cost pool's individual activities have the same or similar relationships between the cost driver and the costs of the activity, it is considered

Accepted Answer

A)   a beneficial cost pool.
B)   a heterogeneous cost pool.
C)   a homogeneous cost pool.
D)   a similar cost pool.
E)   an assigned cost pool.F) A) and D)
G) A) and C)

Exam 14: Period Cost Allocation

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

Correct Answer
verified
The method of using actual rates based o...
View Answer

Which of the following is a valid conclusion, in comparing the three allocation methods?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
All costs that are affected by...
View Answer

The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.

Correct Answer
verified

Benefits of the single-rate method include

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following is true concerning cost allocation in a multi-product company?

Correct Answer
verified

The cost pool is homogeneous if all included activities have the same or similar cause-and-effects or benefits received relationships between the cost driver and the costs of the activity.

Correct Answer
verified

When using the causality criterion, cost drivers are selected as the cost allocation bases.

Correct Answer
verified

A cost pool is a grouping of individual cost items.

Correct Answer
verified

Fixed costs

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An organization determines its allocation base depending upon which of the following factors?

Correct Answer
verified

When all of a cost pool's individual activities have the same or similar relationships between the cost driver and the costs of the activity, it is considered

Correct Answer
verified

Which of the following describes the complete reciprocated cost?

Correct Answer
verified

Exam 14: Period Cost Allocation

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

Correct AnswerverifiedThe method of using actual rates based o...View AnswerShow Answer

Which of the following is a valid conclusion, in comparing the three allocation methods?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAll costs that are affected by...View AnswerShow Answer

The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.

Correct AnswerverifiedShow Answer

Benefits of the single-rate method include

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true concerning cost allocation in a multi-product company?

Correct AnswerverifiedShow Answer

The cost pool is homogeneous if all included activities have the same or similar cause-and-effects or benefits received relationships between the cost driver and the costs of the activity.

Correct AnswerverifiedShow Answer

When using the causality criterion, cost drivers are selected as the cost allocation bases.

Correct AnswerverifiedShow Answer

A cost pool is a grouping of individual cost items.

Correct AnswerverifiedShow Answer

Fixed costs

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An organization determines its allocation base depending upon which of the following factors?

Correct AnswerverifiedShow Answer

When all of a cost pool's individual activities have the same or similar relationships between the cost driver and the costs of the activity, it is considered

Correct AnswerverifiedShow Answer

Which of the following describes the complete reciprocated cost?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The method of using actual rates based o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
All costs that are affected by...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified