ACCT 2302 Ch 19 Quiz
Which of the following costs incurred by Alaska Manufacturing is an example of costs that are inseparable before the split-off point?
a.Administrative costs of $10,000 for the corporate headquarters b.Support department costs of $19,000 for the Janitorial Department and the plant cafeteria c.Joint costs of $90,000 incurred in the production process d.Selling costs of $40,000 incurred by the Sales Department Ans: C
The various methods for allocating support departments have pros and cons. Which of the following is an important reason not to use the direct method for allocating support department costs to production departments?
a.It is not compatible with computerized accounting systems. b.It is the least accurate method. c.It does not incorporate overhead costs. d.It is the most expensive method. Ans: B
Using the direct method, Thomas Company allocates Maintenance Department costs based on square footage serviced, and it services the Cutting and Assembly departments. It allocates Cafeteria Department costs based on the number of employees served in the Cutting and Assembly departments.It has the following information about its two service departments and two production departments, Cutting and Assembly: Maintenance Dept. 500sqft/20 Employees Cafeteria Dept. 3,000sqft/10 Employees Cutting Dept. 1,000sqft/60 Employees Assembly Dept. 9,000sqft/20 Employees What is the percentage (proportional) usage of the Maintenance Department by the Cutting Department?
a.7% b.25% c.10% d.28% Ans: C
Delicious Dairy produced 400 gallons of heavy cream and 1,500 gallons of skimmed milk and incurred $2,000 of joint costs at the split-off point. It also incorporates a processing time weight factor of 1 for the cream and 2 for the skimmed milk. How much of this cost will be allocated to skimmed milk using the weighted average method? (Round percentages to the nearest whole percentage.)
a.$1,560 b.$2,000 c.$1,760 d.$600 Ans: C
Delicious Dairy has 400 gallons of heavy cream and 1,500 gallons of skimmed milk and has incurred $2,000 of joint costs at the split-off point. It can sell each product at the split-off point or process it further in relatively similar processes, so management has decided that the most appropriate method for allocating joint costs is the market value at split-off point. One gallon of cream sells for $10, while one gallon of milk sells for $4. How much of the joint cost is allocated to cream? (Round percentage calculations to the nearest whole percent.)
a.$600 b.$1,333 c.$2,000 d.$800 Ans: D
Which of the following is the correct sequence of events for allocating support department costs to products?
a.Accumulate overhead costs, select an allocation method, allocate overhead costs to products, implement activity-based costing b.Allocate overhead costs to products, accumulate overhead costs, select an allocation method c.Accumulate overhead costs, select an allocation method, allocate overhead costs to products d.Select an allocation method, implement activity-based costing, allocate overhead costs to products, accumulate overhead costs Ans: C
Cherry Valley Lumber's (CVL) lumber mill produces boards of various sizes and quality specifications for the home construction industry. CVL incurs joint costs in the initial phases of processing raw timber, such as transporting the logs to the mill, removing the bark from the logs, and cutting rough-cut boards. After the split-off point, CVL incurs costs in the Planing Department to finalize the finished boards of various grades and sizes. In which of the following scenarios would it be more appropriate for CVL to use the market value at split-off method of joint cost allocation?
a.When CVL's process is simple and there is little difference between the market values of the joint products at split-off. b.When CVL's products require extensive and complicated processing beyond the split-off point and none of the products are sold at split-off. c.When CVL's products are easily measured by physical units that represent the relative market values of the final products. d.When one or more of CVL's products is sold at split-off and the other products require little further processing beyond split-off. Ans: D
The first step for all three methods (direct, sequential, and reciprocal services) of allocating support department costs to production departments is to
a.allocate support department costs by multiplying the support department costs by the percentage usage of each department. b.determine the usage of the support department cost driver by each department. c.apply production department costs to products. d.directly trace and distribute overhead costs to support and production departments. Ans: D
The final step in all three methods (direct, sequential, and reciprocal services) of allocating $600,000 in support department costs to production departments is to
a.apply production department costs to products. b.determine the usage of the support department cost driver by each department. c.directly trace and distribute overhead costs to support and production departments. d.allocate support department costs by multiplying the support department costs by the percentage usage of each department. Ans: A
The physical units method of joint cost allocation allocates costs based on
a.the estimated selling price of the various finished products minus the costs to sell the products. b.a weight factor multiplied by physical units. c.an objective, quantitative metric such as pounds, square feet, or gallons. d.the market values of the various finished products. Ans: C
Fortified Fiber Corporation (FFC) has a production process that incurs joint costs. When determining which costs are part of the joint process, the managerial accountants at FFC must consider the point where
a.the split-off occurs in the manufacturing process (i.e., the split-off point). b.by-products and waste are generated. c.direct labor is added to the production process. d.direct materials are added to the production process. Ans: A
Fortified Fiber Corporation (FFC) has a manufacturing process that produces three products that together incur joint costs. FFC's managerial accountants have determined the appropriate split-off point. Which of the following statements regarding the new costs incurred in the FFC production process after the split-off point is true?
a.All new costs after the split-off point will be considered period costs and expensed immediately. b.Any new costs incurred in FFC's production process after the split-off point can be traced to one of the three final products. c.All new costs after the split-off point will be related to the joint process. d.Any new costs after the split-off point will have to be allocated as joint costs. Ans: B
What is a common feature of all three methods (direct, sequential, and reciprocal services) of allocating support department costs to production departments?
a.All three follow the same six-step process. b.All three are equally expensive to utilize. c.All three are equally complicated to administer. d.All three overlook certain types of overhead costs. Ans: A
James Barton, a production manager for Simpson Products, missed a performance target because of a higher-than-expected allocation of support costs. Which of the following is a possible reason why this happened?
a.Direct materials costs may be too high in James' department. b.James's department overused support activities during the period. c.Materials may have been wasted in the production process. d.All of these choices are correct. Ans: B
The allocation of support department costs and joint costs has important implications for performance evaluation. Which of the following is one way in which evaluations may be impacted?
a.Employee compensation may be determined by the ability to decrease or contain costs. b.Employee compensation may be determined by the ability to increase or contain costs. c.Employee compensation may be determined by the ability to reclassify costs. d.None of these choices are correct. Ans: A
The various methods for allocating support departments have pros and cons. What is an important reason in favor of using the reciprocal services method to allocate support department costs to production departments?
a.It is compatible with computerized accounting systems and the other methods are not. b.It is the most accurate method. c.It incorporates overhead costs and the other methods do not. d.It is the least expensive method. Ans: B
Using the reciprocal services method, which of the following equations represents the algebraic expressions for the two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $500,000 of direct costs but also 20% of the Maintenance Department (M) cost and a Maintenance Department that includes not only $250,000 of direct costs but also 40% of the Janitorial Department?
a.J = $500,000 + (0.20 × J) and M = $250,000 + (0.40 × M) b.J = $500,000 + (0.20 × M) and M = $250,000 + (0.40 × J) c.M = $500,000 + (0.20 × J) and J = $250,000 + (0.40 × J) d.M = $500,000 + (0.20 × M) and J = $250,000 + (0.40 × J) Ans: B
Which of the following is not one of the methods by which support department costs can be applied to products?
a.Multiple production department rates b.Single plantwide rate c.Activity-based budgeting rates d.Activity-based costing Ans: C
Which of the following methods of cost allocation is not one of the four common methods used to allocate the joint costs incurred in a production process?
a.Net realizable value method b.Weighted average method c.Market value at split-off method d.Reciprocal services method Ans: D
Which of the following is the correct rationale behind allocating support department costs to products?
a.Support department costs are impossible to trace to the facility, so they must be traced to the department. b.Support department services may be used more heavily by some products than others, and recording them as facility-level costs can result in inaccurate product costs. c.Support department services are rarely used more heavily by some products than others, and it is best to record them at the facility level for more accurate product costing. d.The Institute of Management Accountants (IMA) requires the allocation of support department costs to products. Ans: B
Which of the following statements about the allocation of support department services is true?
a.Support department services can be allocated using only one rate. b.Support department services can be allocated using one of three different methods. c.Support department services can be allocated to only one product. d.Support department services can be allocated to only one department. Ans: B
Cherry Valley Lumber's (CVL) lumber mill produces boards of various sizes and quality specifications for the home construction industry. CVL incurs joint costs in the initial phases of processing raw timber, such as transporting the logs to the mill, removing the bark from the logs, and cutting rough-cut boards. After the split-off point, CVL incurs costs in the Planing Department to finalize the finished boards of various grades and sizes. Which of the following statements regarding the costs at CVL is true?
a.The costs to finish the boards after the split-off point will not be traced directly to the finished boards according to the various grades and sizes produced. The costs for transporting the logs, removing bark, and cutting the rough-cut boards before the split-off point will be traced to the final finished boards. b.It will be impossible for CVL to directly trace any costs to the finished boards of various grades and sizes. c.CVL will be able to directly trace all costs before and after the split-off point to the finished boards of various grades and sizes. d.The costs for transporting the logs, removing bark, and cutting the rough-cut boards before the split-off point will not be directly traced to the final finished boards. All costs to finish the boards after the split-off point will be traced directly to the finished boards according to the various grades and sizes produced. Ans: D
Which of the following is not one of the common weight factors used in the weighted average method for allocating joint costs?
a.The difficulty of producing each product b.The type of labor needed for each product c.The estimated wear and tear on machines caused by each product d.The estimated research and development costs associated with each product Ans: D
When comparing the results of using the direct, sequential, and reciprocal services methods of allocating support department costs to production departments, which of the following statements is true for a manufacturing company that has a total of $1,500,000 in support costs to allocate?
a.The direct method yields the most accurate allocation of the $1,500,000. b.The sequential method can be viewed as a compromise on accuracy and difficulty in allocating the $1,500,000 because it considers some, though not all, inter-support-department services and is easier to compute than the reciprocal services method. c.The reciprocal services method can be viewed as a compromise on accuracy and difficulty in allocating the $1,500,000 because it considers some, though not all, inter-support-department services and is easier to compute than the direct method. d.The reciprocal services method allocates more than $1,500,000 to the production departments. Ans: B
Which of the following is the correct representation of the terms used when describing the transfer of support department costs to products?
a.Transferring support department costs to products is referred to as allocating costs of goods sold. b.Transferring support department costs to products is referred to as allocating maintenance costs. c.Transferring support department costs to products is referred to as allocating plantwide costs. d.Transferring support department costs to products is referred to as allocating overhead costs. Ans: D
When multiple production department rates are used to apply overhead to products, overhead costs are
a.expensed as period costs and direct labor and direct materials are traced to the products using multiple production department rates. b.first directly traced or distributed to the products using multiple rates. c.first directly traced or distributed to support and production departments and then allocated to production departments based on support activity used by each production department. d.combined with all other support department costs using a single rate and then allocated to products with multiple rates. Ans: C
When a single plantwide overhead rate is used to apply overhead to products, support department costs are
a.impossible to trace. b.nonexistent, because a single plantwide rate cannot be used when a company has support departments. c.combined with all other overhead costs. d.allocated with multiple drivers using a single rate. Ans: C
When a single manufacturing process, such as the production of pharmaceuticals and medicines, generates multiple outputs, it is called a
a.joint manufacturing process. b.split-off product. c.joint product. d.split manufacturing process. Ans: A
Support departments are sometimes called
a.production departments. b.service departments because they provide services to other departments within the organization. c.service departments because they provide services to other departments outside the organization. d.service departments because they provide customer service. Ans: B
