When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are

ACCOUNTING

Multiple Choice

When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are respectively known as

a. joint products and byproducts.

b. joint products and scrap.

c. main products and byproducts.

d. main products and joint products.

Click here for the SOLUTION

Which of the following is NOT a primary reason for allocating joint costs

ACCOUNTING

Multiple Choice

Which of the following is NOT a primary reason for allocating joint costs?

a. Cost justification and insurance settlement cost information requirements

b. Cost justification and asset measurement

c. Income measurement and rate regulation requirements

d. To calculate the bonus of the chief executive officer

Click here for the SOLUTION

Proper costs allocation for inventory costing and cost-of-goods-sold computations are important because

ACCOUNTING

Multiple Choice

Proper costs allocation for inventory costing and cost-of-goods-sold computations are important because

a. inventory costing is essential for proper balance sheet presentation.

b. most states have laws requiring proper balance sheet presentation, and recommended allocation methods.

c. cost of goods sold is an important component in the determination of net income.

d. of both (a) and (c).

Click here for the SOLUTION

A business which enters into a contract to purchase a product (or products), and will compensate the manufacturer under a cost reimbursement formula

ACCOUNTING

Multiple Choice

A business which enters into a contract to purchase a product (or products), and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because

a. the manufacturer will attempt to allocate as large a portion of its costs to these products.

b. if the manufacturer successfully allocates a large portion of its costs to these products then it will be able to sell its other nonreimbursed products at lower prices.

c. the FASB requires the business to participate in the cost allocation process.

d. of both (a) and (b).

Click here for the SOLUTION

Which of the following is a reason to allocate joint costs

ACCOUNTING

Multiple Choice

Which of the following is a reason to allocate joint costs?

a. Rate regulation requirements, if applicable

b. Cost of goods sold computations

c. Insurance settlement cost information requirements

d. All of the above are reasons to allocate joint costs.

Click here for the SOLUTION

Outputs with zero sales value are accounted for by

ACCOUNTING

Multiple Choice

Outputs with zero sales value are accounted for by

a. listing these various outputs in a footnote to the financial statements.

b. including the items as a relatively small portion of the value assigned to the products produced during the accounting period.

c. making journal entries to reflect an estimate of possible values.

d. none of the above.

Click here for the SOLUTION

Which of the following statements is true regarding main products and byproducts

ACCOUNTING

Multiple Choice

Which of the following statements is true regarding main products and byproducts?

a. Product classifications do not change over the short run.

b. Product classifications do not change over the long run.

c. Product classifications may change over time.

d. The cause-and-effect criterion determines the classification.

Click here for the SOLUTION

Products with a relatively low sales value are known as

ACCOUNTING

Multiple Choice

Products with a relatively low sales value are known as

a. scrap.

b. main products.

c. joint products.

d. byproducts.

Click here for the SOLUTION

Which of the following methods of allocating costs use market-based data

ACCOUNTING

Multiple Choice

Which of the following methods of allocating costs use market-based data?

a. Sales value at splitoff method

b. Estimated net realizable value method

c. The constant gross-margin percentage method

d. All of the above use market-based methods

Click here for the SOLUTION

All of the following changes may indicate a change in product classification of a manufacturing process which has a splitoff point EXCEPT

ACCOUNTING

Multiple Choice

All of the following changes may indicate a change in product classification of a manufacturing process which has a splitoff point EXCEPT

a. a byproduct increases in sales value due to a new application.

b. a main product becomes a joint product.

c. a main product becomes technologically obsolete.

d. a byproduct loses its market due to a new invention.

Click here for the SOLUTION

Byproducts and main products are differentiated by

ACCOUNTING

Multiple Choice

Byproducts and main products are differentiated by

a. number of units per processing period.

b. weight or volume of outputs per period.

c. the amount of sales value per unit.

d. none of the above.

Click here for the SOLUTION

In joint costing

ACCOUNTING

Multiple Choice

In joint costing

a. costs are assigned to individual products as assembly of the product occurs.

b. costs are assigned to individual products as disassembly of the product occurs.

c. a single production process yields two or more products.

d. both (b) and (c).

Click here for the SOLUTION

All costs incurred beyond the splitoff point that are assignable to one or more individual products are called

ACCOUNTING

Multiple Choice

All costs incurred beyond the splitoff point that are assignable to one or more individual products are called

a. byproduct costs.

b. joint costs.

c. main costs.

d. separable costs.

Click here for the SOLUTION

What type of cost is the result of an event that results in more than one product or service simultaneously

ACCOUNTING

Multiple Choice

What type of cost is the result of an event that results in more than one product or service simultaneously?

a. Byproduct cost

b. Joint cost

c. Main cost

d. Separable cost

Click here for the SOLUTION

A sound reason for reporting revenue from byproducts as an income statement item at the time of sale is to lessen the chance of managers managing

ACCOUNTING

True or False

A sound reason for reporting revenue from byproducts as an income statement item at the time of sale is to lessen the chance of managers managing reported earnings

Click here for the SOLUTION

Recognition of byproducts in the financial statements at the time of sale usually occurs when the dollar amounts of the byproducts are immaterial

ACCOUNTING

True or False

Recognition of byproducts in the financial statements at the time of sale usually occurs when the dollar amounts of the byproducts are immaterial

Click here for the SOLUTION

Byproducts are recognized in the general ledger either at the time of production or at the time of sale

ACCOUNTING

True or False

Byproducts are recognized in the general ledger either at the time of production or at the time of sale

Click here for the SOLUTION

Joint costs that do not differ between alternatives are particularly relevant for decision making

ACCOUNTING

True or False

Joint costs that do not differ between alternatives are particularly relevant for decision making

Click here for the SOLUTION

Physical measures such as weight or volume are the best indicator of the benefits received for allocating joint costs

ACCOUNTING

True or False

Physical measures such as weight or volume are the best indicator of the benefits received for allocating joint costs

Click here for the SOLUTION

A criticism of the practice of carrying inventories at estimated net realizable values is that this practice recognizes income before sales are made

ACCOUNTING

True or False

A criticism of the practice of carrying inventories at estimated net realizable values is that this practice recognizes income before sales are made

Click here for the SOLUTION

The sales value at splitoff method presupposes the exact number of subsequent steps undertaken for further processing

ACCOUNTING

True or False

The sales value at splitoff method presupposes the exact number of subsequent steps undertaken for further processing

Click here for the SOLUTION

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at splitoff and estimated net

ACCOUNTING

True or False

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at splitoff and estimated net realizable value) since no account is taken of profits earned before or after the splitoff point when allocating joint costs

Click here for the SOLUTION

The estimated net realizable value method allocates joint costs on the basis of the expected final sales value in the ordinary course of business less

ACCOUNTING

True or False

The estimated net realizable value method allocates joint costs on the basis of the expected final sales value in the ordinary course of business less the expected separable costs of production and marketing

Click here for the SOLUTION

The net realizable value method is generally used for products or services that are processed and after splitoff additional value is added to the

ACCOUNTING

True or False

The net realizable value method is generally used for products or services that are processed and after splitoff additional value is added to the product and a selling price can be determined

Click here for the SOLUTION

Net realizable value generally means expected sales value plus expected separable costs

ACCOUNTING

True or False

Net realizable value generally means expected sales value plus expected separable costs

Click here for the SOLUTION

The estimated net realizable value method is used when the market selling prices at the splitoff point are not available

ACCOUNTING

True or False

The estimated net realizable value method is used when the market selling prices at the splitoff point are not available

Click here for the SOLUTION

The general guideline for using the physical-measure method is to include only joint products or main products in the physical-measure weighting compu

ACCOUNTING

True or False

The general guideline for using the physical-measure method is to include only joint products or main products in the physical-measure weighting computations

Click here for the SOLUTION

An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task

ACCOUNTING

True or False

An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task

Click here for the SOLUTION

A major deficiency of the sales value at splitoff method is that this method does not allow management to obtain individual product costs and gross-ma

ACCOUNTING

True or False

A major deficiency of the sales value at splitoff method is that this method does not allow management to obtain individual product costs and gross-margin information

Click here for the SOLUTION

The sales value at splitoff method is an example of allocating costs based upon the benefits-received criterion

ACCOUNTING

True or False

The sales value at splitoff method is an example of allocating costs based upon the benefits-received criterion

Click here for the SOLUTION

Contract disputes with regard to cost allocation can be reduced by

ACCOUNTING

Multiple Choice

Contract disputes with regard to cost allocation can be reduced by

a. defining the cost items allowed.

b. defining the terms used, such as what constitutes direct labor.

c. defining permissible cost-allocation bases.

d. defining all of the above.

Click here for the SOLUTION

A byproduct has a minimal sales value

ACCOUNTING

True or False

A byproduct has a minimal sales value

Click here for the SOLUTION

The focus of joint costing is assigning costs to individual products as assembly occurs

ACCOUNTING

True or False

The focus of joint costing is assigning costs to individual products as assembly occurs

Click here for the SOLUTION

Separable costs are assignable after the splitoff point

ACCOUNTING

True or False

Separable costs are assignable after the splitoff point

Click here for the SOLUTION

Joint costs are incurred beyond the splitoff point and are assignable to individual products

ACCOUNTING

True or False

Joint costs are incurred beyond the splitoff point and are assignable to individual products

Click here for the SOLUTION

Using the stand-alone method with physical units as the weight for revenue allocation, what amount will be allocated to the refrigerator

ACCOUNTING

Multiple Choice

The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.


Refrigerator


Full-size Freezer


Packaged Price

Selling price


$825


$375


$1,000

Manufacturing cost per unit


$620


$180


Stand-alone product revenues


$1,225,000


$775,000


Using the stand-alone method with physical units as the weight for revenue allocation, what amount will be allocated to the refrigerator?

a. $500

b. $20

c. $775

d. $825

Click here for the SOLUTION

Using the stand-alone method with manufacturing cost per unit as the weight for revenue allocation, what amount will be allocated to the refrigerator

ACCOUNTING

Multiple Choice

The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.


Refrigerator


Full-size Freezer


Packaged Price

Selling price


$825


$375


$1,000

Manufacturing cost per unit


$620


$180


Stand-alone product revenues


$1,225,000


$775,000


Using the stand-alone method with manufacturing cost per unit as the weight for revenue allocation, what amount will be allocated to the refrigerator?

a. $500.00

b. $612.50

c. $620.00

d. $775.00

Click here for the SOLUTION

Using the stand-alone method with stand-alone product revenues as the weight for revenue allocation, what amount will be allocated to the refrigerator

ACCOUNTING

Multiple Choice

The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.


Refrigerator


Full-size Freezer


Packaged Price

Selling price


$825


$375


$1,000

Manufacturing cost per unit


$620


$180


Stand-alone product revenues


$1,225,000


$775,000


Using the stand-alone method with stand-alone product revenues as the weight for revenue allocation, what amount will be allocated to the refrigerator?

a. $687.50

b. $612.50

c. $625.00

d. $825.00

Click here for the SOLUTION

Using the stand-alone method with selling price as the weight for revenue allocation, what amount will be allocated to the refrigerator

ACCOUNTING

Multiple Choice

The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.


Refrigerator


Full-size Freezer


Packaged Price

Selling price


$825


$375


$1,000

Manufacturing cost per unit


$620


$180


Stand-alone product revenues


$1,225,000


$775,000


Using the stand-alone method with selling price as the weight for revenue allocation, what amount will be allocated to the refrigerator?

a. $500.00

b. $825.00

c. $687.50

d. $625.00

Click here for the SOLUTION

Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products

ACCOUNTING

Multiple Choice

Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:


Stand-Alone

Selling Price


Cost



Package


Packaged

Price

Reading Fun


$50


$7.20



1. Reading Fun & Math Fun


$88

Math Fun


$60


$8.00



2. Reading Fun & Analysis


$112

Analysis


$90


$10.00


3. All three

$152


Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products?

a. $48.25

b. $60.00

c. $45.60

d. $50.67

Click here for the SOLUTION

Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Math Fun in the pack

ACCOUNTING

Multiple Choice

Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:


Stand-Alone

Selling Price


Cost



Package


Packaged

Price

Reading Fun


$50


$7.20



1. Reading Fun & Math Fun


$88

Math Fun


$60


$8.00



2. Reading Fun & Analysis


$112

Analysis


$90


$10.00


3. All three

$152


Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Math Fun in the package that contains all three products?

a. $48.25

b. $60.00

c. $45.60

d. $50.67

Click here for the SOLUTION

1. Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math

ACCOUNTING

Multiple Choice

Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:


Stand-Alone

Selling Price


Cost



Package


Packaged

Price

Reading Fun


$50


$7.20



1. Reading Fun & Math Fun


$88

Math Fun


$60


$8.00



2. Reading Fun & Analysis


$112

Analysis


$90


$10.00


3. All three

$152


Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis.

a. $40

b. $44

c. $38

d. $50

Click here for the SOLUTION

Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Reading Fun in the

ACCOUNTING

Multiple Choice

Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:


Stand-Alone

Selling Price


Cost



Package


Packaged

Price

Reading Fun


$50


$7.20



1. Reading Fun & Math Fun


$88

Math Fun


$60


$8.00



2. Reading Fun & Analysis


$112

Analysis


$90


$10.00


3. All three

$152


Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)?

a. $40

b. $44

c. $38

d. $50

Click here for the SOLUTION

The revenue allocation may be weighted using physical units when

ACCOUNTING

Multiple Choice

The revenue allocation may be weighted using physical units when

a. the individual products within the bundle have approximately the same value.

b. selling prices are unstable and unit costs are difficult to calculate.

c. other methods cannot be used for various reasons.

d. any of the above conditions exist.

Click here for the SOLUTION

To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using

ACCOUNTING

Multiple Choice

To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using

a. selling prices.

b. unit costs.

c. physical units.

d. stand-alone product revenues.

Click here for the SOLUTION

Approaches used to rank products for revenue allocation might include

ACCOUNTING

Multiple Choice

Approaches used to rank products for revenue allocation might include

a. surveying customers on the importance of each product.

b. using recent data on stand-alone sales performance.

c. having managers use their knowledge and intuition.

d. any of the above.

Click here for the SOLUTION

The method that ranks individual products in a bundle for revenue allocation is the

ACCOUNTING

Multiple Choice

The method that ranks individual products in a bundle for revenue allocation is the

a. stand-alone revenue-allocation method.

b. incremental revenue-allocation method.

c. unit-cost weighting method.

d. physical-unit weighting method.

Click here for the SOLUTION

The method LEAST likely to cause disputes among product managers is

ACCOUNTING

Multiple Choice

The method LEAST likely to cause disputes among product managers is

a. stand-alone revenue-allocation method.

b. incremental revenue-allocation method.

c. the direct revenue-allocation method.

d. (a), (b), and (c) are all likely to result in the same disputes among product managers.

Click here for the SOLUTION

Businesses offer bundled products

ACCOUNTING

Multiple Choice

Businesses offer bundled products

a. to increase customer exposure.

b. to increase overall company profitability.

c. to avoid the problems of revenue allocation.

d. both (a) and (b).

Click here for the SOLUTION

AAA offers towing services, auto routing, travel brochures, and other travel services for one annual fee. This is an example of

ACCOUNTING

Multiple Choice

AAA offers towing services, auto routing, travel brochures, and other travel services for one annual fee. This is an example of

a. revenue tracing.

b. revenue allocation.

c. a bundled product.

d. a joint product.

Click here for the SOLUTION

An example of a revenue object is

ACCOUNTING

Multiple Choice

An example of a revenue object is

a. a customer.

b. a specific product.

c. a division of a company.

d. all of the above

Click here for the SOLUTION

_______________ occurs where revenues, related but not traceable to individual products, are assigned to those individual products

ACCOUNTING

Multiple Choice

_______________ occurs where revenues, related but not traceable to individual products, are assigned to those individual products.

a. Revenue tracing

b. Revenue allocation

c. Stand-alone pricing

d. Reciprocal pricing

Click here for the SOLUTION

In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because

ACCOUNTING

Multiple Choice

In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because

a. the government is concerned that one firm might monopolize defense contracts.

b. there is an implicit agreement among defense contractors to “share contracts.”

c. all defense contractors have essentially the same cost structure.

d. of none of the above.

Click here for the SOLUTION

__________ is a cost that the contract parties agree to include in the costs to be reimbursed

ACCOUNTING

Multiple Choice

__________ is a cost that the contract parties agree to include in the costs to be reimbursed.

a. An allowable cost

b. An unallowable cost

c. An incremental cost

d. A stand-alone cost

Click here for the SOLUTION

Cost-based prices

ACCOUNTING

Multiple Choice

Cost-based prices

a. are one way of setting prices in a competitive market.

b. provide an inherit incentive for the producer to control costs.

c. pass the majority of risk to the buyer.

d. are required in all government contracts.

Click here for the SOLUTION

All contracts with U.S. government agencies must comply with cost accounting standards issued by

ACCOUNTING

Multiple Choice

All contracts with U.S. government agencies must comply with cost accounting standards issued by

a. FASB.

b. SEC.

c. IRS.

d. CASB.

Click here for the SOLUTION

1. If the incremental method were used, what amount of cost would be allocated to the start-up business

ACCOUNTING

Multiple Choice

The Egg Harbor Corporation currently leases a corporate suite in an office building for a cost of $90,000 a year. Only 70% of the corporate suite is currently being used. A start-up business has proposed a plan that would utilize the other 30% of the suite and increase the overall costs of maintaining the space by $10,000.


If the incremental method were used, what amount of cost would be allocated to the start-up business?

a. $10,000

b. $27,000

c. $30,000

d. $37,000

Click here for the SOLUTION

1. If the stand-alone method were used, what amount of cost would be allocated to the start-up business

ACCOUNTING

Multiple Choice

The Egg Harbor Corporation currently leases a corporate suite in an office building for a cost of $90,000 a year. Only 70% of the corporate suite is currently being used. A start-up business has proposed a plan that would utilize the other 30% of the suite and increase the overall costs of maintaining the space by $10,000.


If the stand-alone method were used, what amount of cost would be allocated to the start-up business?

a. $10,000

b. $27,000

c. $30,000

d. $37,000

Click here for the SOLUTION

If the incremental method were used, what amount of cost would be allocated to the start-up business

ACCOUNTING

Multiple Choice

The Sturgeon Bay Corporation currently utilizes a manufacturing facility costing $400,000 per year; 80% of the facility’s capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%.


If the incremental method were used, what amount of cost would be allocated to the start-up business?

. a. $20,000

b. $100,000

c. $80,000

d. $84,000

Click here for the SOLUTION

If the stand-alone method were used, what amount of cost would be allocated to the start-up business

ACCOUNTING

Multiple Choice

The Sturgeon Bay Corporation currently utilizes a manufacturing facility costing $400,000 per year; 80% of the facility’s capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%.


If the stand-alone method were used, what amount of cost would be allocated to the start-up business?

a. $20,000

b. $100,000

c. $80,000

d. $84,000

Click here for the SOLUTION

Under the incremental method of allocating common costs

ACCOUNTING

Multiple Choice

Under the incremental method of allocating common costs

a. the parties are interested in being viewed as primary users.

b. each party bears a proportionate share of the total costs in relation to their individual stand-alone costs.

c. fairness and equity are emphasized.

d. there is a disincentive to be titled the primary user.

Click here for the SOLUTION

Under the stand-alone method of allocating common costs

ACCOUNTING

Multiple Choice

Under the stand-alone method of allocating common costs

a. a ranking is used to allocate costs among the users.

b. disputes can arise over who is the primary user.

c. each party bears a proportionate share of the total costs in relation to their individual stand-alone costs.

d. an incentive is created to be the first-ranked user.

Click here for the SOLUTION

A cost of operating a facility, department, activity area, or like cost object that is shared by two or more users is called a

ACCOUNTING

Multiple Choice

A cost of operating a facility, department, activity area, or like cost object that is shared by two or more users is called a

a. direct cost.

b. joint cost.

c. fixed cost.

d. common cost.

Click here for the SOLUTION

What is the complete reciprocated cost of the Data Processing Department

ACCOUNTING

Multiple Choice

Alfred, 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:

Plant Maintenance PM (Support Dept) $350,000

Data Processing DP (Support Dept) $ 75,000

Machining M (Operating Dept) $225,000

Capping C (Operating Dept) $125,000


Services furnished:

By Plant Maintenance (budgeted labor-hours):

to Data Processing 3,500

to Machining 5,000

to Capping 8,200

By Data Processing (budgeted computer time):

to Plant Maintenance 600

to Machining 3,500

to Capping 600


What is the complete reciprocated cost of the Data Processing Department?

a. $90,000

b. $118,750

c. $122,971

d. $152,432

Click here for the SOLUTION

What is the complete reciprocated cost of the Plant Maintenance Department

ACCOUNTING

Multiple Choice

Alfred, 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:

Plant Maintenance PM (Support Dept) $350,000

Data Processing DP (Support Dept) $ 75,000

Machining M (Operating Dept) $225,000

Capping C (Operating Dept) $125,000


Services furnished:

By Plant Maintenance (budgeted labor-hours):

to Data Processing 3,500

to Machining 5,000

to Capping 8,200

By Data Processing (budgeted computer time):

to Plant Maintenance 600

to Machining 3,500

to Capping 600


What is the complete reciprocated cost of the Plant Maintenance Department?

a. $393,750

b. $369,459

c. $365,000

d. $375,773

Click here for the SOLUTION

Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department

ACCOUNTING

Multiple Choice

Alfred, 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:

Plant Maintenance PM (Support Dept) $350,000

Data Processing DP (Support Dept) $ 75,000

Machining M (Operating Dept) $225,000

Capping C (Operating Dept) $125,000


Services furnished:

By Plant Maintenance (budgeted labor-hours):

to Data Processing 3,500

to Machining 5,000

to Capping 8,200

By Data Processing (budgeted computer time):

to Plant Maintenance 600

to Machining 3,500

to Capping 600


Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

a. DP= $75,000 + (600/4,700) PM

b. DP= $75,000 + (3,500/16,700) PM

c. DP= $75,000 x (600/4,700) + $350,000 x (3,340/16,700)

d. DP= $350,000 + (600/16,700) DP

Click here for the SOLUTION

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

a. $32,000

b. $42,667

c. $57,334

d. $64,000

Click here for the SOLUTION

Using the direct method, what amount of Personnel Department costs will be allocated to Department A

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the direct method, what amount of Personnel Department costs will be allocated to Department A?

a. $10,000

b. $16,000

c. $24,000

d. $30,000

Click here for the SOLUTION

Using the direct method, what amount of Maintenance Department costs will be allocated to Department A

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the direct method, what amount of Maintenance Department costs will be allocated to Department A?

a. $48,000

b. $64,000

c. $78,000

d. $96,000

Click here for the SOLUTION

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

a. $32,000

b. $42,667

c. $57,334

d. $64,000

Click here for the SOLUTION

Using the direct method, what amount of Personnel Department costs will be allocated to Department B

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the direct method, what amount of Personnel Department costs will be allocated to Department B?

a. $10,000

b. $16,000

c. $24,000

d. $30,000

Click here for the SOLUTION

Using the direct method, what amount of Maintenance Department costs will be allocated to Department B

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

a. $48,000

b. $64,000

c. $78,000

d. $96,000

Click here for the SOLUTION

Complete reciprocated costs

ACCOUNTING

Multiple Choice

Complete reciprocated costs

a. are less than the support department’s own costs.

b. include the support department’s costs plus any interdepartmental cost allocations.

c. are utilized for step-down allocations.

d. are also referred to as budgeted costs.

Click here for the SOLUTION

The reciprocal allocation method

ACCOUNTING

Multiple Choice

The reciprocal allocation method

a. is the most widely used because of its simplicity.

b. requires the ranking of support departments in the order that the allocation is to proceed.

c. is conceptually the most precise.

d. results in allocating more support costs to operating departments than actually incurred.

Click here for the SOLUTION

The step-down allocation method

ACCOUNTING

Multiple Choice

The step-down allocation method

a. typically begins with the support department that provides the highest percentage of its total services to other support departments.

b. recognizes the total amount of services that support departments provide to each other.

c. allocates complete reciprocated costs.

d. offers key input for outsourcing decisions

Click here for the SOLUTION

The direct allocation method

ACCOUNTING

Multiple Choice

The direct allocation method

a. partially recognizes the services provided among support departments.

b. is also referred to as the sequential method.

c. is conceptually the most precise method.

d. results in allocating only the support costs used by operating departments

Click here for the SOLUTION

Under which allocation method are one-way reciprocal support services recognized

ACCOUNTING

Multiple Choice

Under which allocation method are one-way reciprocal support services recognized

a. The direct method

b. The artificial cost method

c. The reciprocal method

d. The step-down method

Click here for the SOLUTION

The method that allocates costs by explicitly including all the services rendered among all support departments is

ACCOUNTING

Multiple Choice

The method that allocates costs by explicitly including all the services rendered among all support departments is

a. the direct method.

b. the step-down method.

c. the reciprocal method.

d. the sequential method.

Click here for the SOLUTION

The support department allocation method that is the most widely used because of its simplicity is the

ACCOUNTING

Multiple Choice

The support department allocation method that is the most widely used because of its simplicity is the

a. step-down method.

b. reciprocal allocation method.

c. direct allocation method.

d. sequential allocation method.

Click here for the SOLUTION

Which of the following departments is NOT a support department for a boat manufacturing company

ACCOUNTING

Multiple Choice

Which of the following departments is NOT a support department for a boat manufacturing company?

a. Personnel

b. Molding and assembly

c. Data processing

d. Accounting

Click here for the SOLUTION

Special cost-allocation problems arise when

ACCOUNTING

Multiple Choice

Special cost-allocation problems arise when

a. support department costs exceed budgetary estimates.

b. practical capacity is used as the allocation base.

c. support departments provide reciprocal services to other support departments.

d. there is more than one operating department.

Click here for the SOLUTION

To discourage unnecessary use of a support department, management might

ACCOUNTING

Multiple Choice

To discourage unnecessary use of a support department, management might

a. not allocate any support department costs to user departments.

b. allocate support department costs based upon user department usage.

c. allocate a fixed amount of support department costs to each department regardless of use.

d. issue memos on useful services provided by the support department.

Click here for the SOLUTION

The costs of unused capacity are highlighted when

ACCOUNTING

Multiple Choice

The costs of unused capacity are highlighted when

a. actual usage based allocations are used.

b. budgeted usage allocations are used.

c. practical capacity-based allocations are used.

d. the dual-rate cost-allocation method allocates fixed costs based on actual usage.

Click here for the SOLUTION

Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then

ACCOUNTING

Multiple Choice

Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then

a. user-division managers are motivated to make accurate long-run usage forecasts.

b. user-division managers can better plan for the short-run and for the long-run.

c. the costs of unused capacity are highlighted.

d. variations in one division’s usage affect another division’s allocation.

Click here for the SOLUTION

When actual cost-allocations rates are used

ACCOUNTING

Multiple Choice

When actual cost-allocations rates are used

a. user divisions pay for costs that exceed budgeted amounts.

b. managers of the supplier division are motivated to improve efficiency.

c. user divisions do not know allocated amounts until the end of the accounting period.

d. managers of the user divisions may be tempted to underestimate planned usage.

Click here for the SOLUTION

When budgeted cost-allocations rates are used

ACCOUNTING

Multiple Choice

When budgeted cost-allocations rates are used

a. variations in actual usage by one division affect the costs allocated to other divisions.

b. the manager of the supplier division bears the risk of unfavorable cost variances.

c. user divisions pay for costs that exceed budgeted amounts.

d. user divisions pay for inefficiencies of the supplier department.

Click here for the SOLUTION

If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Night Light Division

ACCOUNTING

Multiple Choice

The Borders Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year.

Budgeted costs of operating the plant for 2,000 to 3,000 hours:

Fixed operating costs per year $900,000

Variable operating costs $1,200 per hour

Budgeted long-run usage per year:

Flashlight Division 2,000 hours

Night Light Division 500 hours

Practical capacity 3,000 hours

Assume that practical capacity is used to calculate the allocation rates.

Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.

If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

a. $750,000

b. $870,000

c. $780,000

d. $900,000

Click here for the SOLUTION

If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division

ACCOUNTING

Multiple Choice

The Borders Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year.

Budgeted costs of operating the plant for 2,000 to 3,000 hours:

Fixed operating costs per year $900,000

Variable operating costs $1,200 per hour

Budgeted long-run usage per year:

Flashlight Division 2,000 hours

Night Light Division 500 hours

Practical capacity 3,000 hours

Assume that practical capacity is used to calculate the allocation rates.

Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.

If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division?

a. $780,000

b. $900,000

c. $750,000

d. $870,000

Click here for the SOLUTION

If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division

ACCOUNTING

Multiple Choice

The Borders Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year.

Budgeted costs of operating the plant for 2,000 to 3,000 hours:

Fixed operating costs per year $900,000

Variable operating costs $1,200 per hour

Budgeted long-run usage per year:

Flashlight Division 2,000 hours

Night Light Division 500 hours

Practical capacity 3,000 hours

Assume that practical capacity is used to calculate the allocation rates.

Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.

If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs

a. $2,280,000

b. $2,400,000

c. $3,000,000

d. $2,100,000

Click here for the SOLUTION

If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division

ACCOUNTING

Multiple Choice

The Borders Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year.

Budgeted costs of operating the plant for 2,000 to 3,000 hours:

Fixed operating costs per year $900,000

Variable operating costs $1,200 per hour

Budgeted long-run usage per year:

Flashlight Division 2,000 hours

Night Light Division 500 hours

Practical capacity 3,000 hours

Assume that practical capacity is used to calculate the allocation rates.

Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.

If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division?

a. $3,000,000

b. $3,120,000

c. $2,280,000

d. $2,820,000

Click here for the SOLUTION

If a dual-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Operations Department

ACCOUNTING

Multiple Choice

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 costs of operating the copying facility

for 200,000 to 300,000 copies:

Fixed costs per year $30,000

Variable costs 3 cents (.03) per copy

Budgeted long-run usage in copies per year:

Marketing Department 60,000 copies

Operations Department 190,000 copies

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 dual-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs.

a. $30,245

b. $29,945

c. $28,500

d. $28,200

Click here for the SOLUTION

If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department

ACCOUNTING

Multiple Choice

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 costs of operating the copying facility

for 200,000 to 300,000 copies:

Fixed costs per year $30,000

Variable costs 3 cents (.03) per copy

Budgeted long-run usage in copies per year:

Marketing Department 60,000 copies

Operations Department 190,000 copies

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 dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department?

a. $28,500

b. $28,200

c. $30,245

d. $29,945

Click here for the SOLUTION

If a single-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department

ACCOUNTING

Multiple Choice

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 costs of operating the copying facility

for 200,000 to 300,000 copies:

Fixed costs per year $30,000

Variable costs 3 cents (.03) per copy

Budgeted long-run usage in copies per year:

Marketing Department 60,000 copies

Operations Department 190,000 copies

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 actual usage is used to allocate copying costs.

a. $8,400

b. $9,000

c. $6,000

d. $4,800

Click here for the SOLUTION

If a single-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department

ACCOUNTING

Multiple Choice

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 costs of operating the copying facility

for 200,000 to 300,000 copies:

Fixed costs per year $30,000

Variable costs 3 cents (.03) per copy

Budgeted long-run usage in copies per year:

Marketing Department 60,000 copies

Operations Department 190,000 copies

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 budgeted for the Marketing Department?

a. $9,000

b. $1,800

c. $7,200

d. $8,400

Click here for the SOLUTION

Benefits of the dual-rate method include

ACCOUNTING

Multiple Choice

Benefits of the dual-rate method include

a. variable costs that are transformed into fixed costs for user decision making.

b. the low cost of implementation.

c. avoidance of expensive analysis for categorizing costs as either fixed or variable.

d. information that leads to outsourcing decisions that benefit the organization as a whole.

Click here for the SOLUTION

Benefits of the single-rate method include

ACCOUNTING

Multiple Choice

Benefits of the single-rate method include

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.

Click here for the SOLUTION

When using the single-rate method, fixed cost allocation may be based on

ACCOUNTING

Multiple Choice

When using the single-rate method, fixed cost allocation may be based on

a. actual usage

b. budgeted usage

c. incremental cost allocation

d. either (a) or (b)

Click here for the SOLUTION