Chapter 15

Electro Corp sells a refrigerator and a freezer as a single package for $1150. Other data are in the chart below. Using the stand-alone method with manufacturing cost per unit as the weight for revenue allocation, what amount will be allocated to the refrigerator? (Do not round any intermediary calculations.) A) $304.82 B) $575.00 C) $661.45 D) $845.18

D) $845.18

Under which allocation method are one-way reciprocal support services recognized? A) direct method B) artificial cost method C) reciprocal method D) step-down method

D) step-down method

Illumination 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 2000 to 3000 hours: Fixed operating costs per year $480,000 Variable operating costs $800 per hour Budgeted long-run usage per year: Flashlight Division 1500 hours Night Light Division 600 hours Practical capacity 3000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1400 hours and by the Night Light Division was 700 hours. If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division? A) $1,440,000 B) $1,344,000 C) $1,424,000 D) $1,360,000

A) $1,440,000

Craylon Corp sells two products X and Y. X sells for $200 and Y sells for $160. Both X and Y sell for $310 as a bundle. What is the revenue allocated to product Y, if product X is termed as the primary product in the bundle? A) $110 B) $40 C) $80 D) $155

A) $110

Buzz'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: 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)? (Do not round any intermediary calculations.) A) $14.90 B) $33.10 C) $30.00 D) $18.00

A) $14.90

The Charmatz 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 300,000 to 500,000 copies: Fixed costs per year $61,000 Variable costs 6 cents (0.06) per copy Budgeted long-run usage in copies per year: Marketing Department 100,000 copies Operations Department 400,000 copies Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 320,000 copies. If a single-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department? (Round any intermediary calculations to the nearest cent.) A) $18,200 B) $6000 C) $12,200 D) $21,250

A) $18,200

Harbor Corp currently leases a corporate suite in an office building for a cost of $360,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,484. If the incremental method were used, what amount of cost would be allocated to the start-up business? A) $20,484 B) $380,484 C) $76,097 D) $88,387

A) $20,484

A company sells a software suite that includes a word processor and spreadsheet applications. The suite sells for $250 and the items are also available separately for $200 (spreadsheet) and $170 (word processor). The spreadsheet app is by far the best seller of the standalone product sales. Using the incremental-revenue allocation method and assuming that the spreadsheet is the primary product, how much of the $250 revenue from the bundled product sale would be allocated to the spreadsheet and to the word processing products? A) $200 of revenue for the spreadsheet and $50 for the word processor B) $200 of revenue for the spreadsheet and $0 for the word processor C) $135 of revenue for the spreadsheet and $115 for the word processor D) $250 of revenue for the spreadsheet and $0 for the word processor

A) $200 of revenue for the spreadsheet and $50 for the word processor

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Maintenance M (Support Dept) $340,000 Personnel P (Support Dept) $140,000 Weaving W (Weaving Dept) $690,000 Colorizing C (Colorizing Dept) $440,000 Services furnished: By Maintenance (budgeted labor-hours): to Personnel 1800 to Weaving 7500 to Colorizing 4600 By Personnel (Number of employees serviced): Plant Maintenance 9 Weaving 40 Colorizing 29 What is the complete reciprocated cost of the Maintenance Department? (Do not round any intermediary calculations.) A) $361,556 B) $356,154 C) $340,000 D) $0

A) $361,556

Electro Corp sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below. Using the stand-alone method with physical units as the weight for revenue allocation, what amount will be allocated to the refrigerator? A) $510 B) $180 C) $640 D) $820

A) $510

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $400,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $240,000 and $360,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Using the direct method, what amount of Personnel Department costs will be allocated to Department A? (Do not round any intermediary calculations.) A) $58,824 B) $52,632 C) $70,588 D) $141,176

A) $58,824

The Charmatz 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 400,000 to 600,000 copies: Fixed costs per year $64,000 Variable costs 5 cents (0.05) per copy Budgeted long-run usage in copies per year: Marketing Department 90,000 copies Operations Department 310,000 copies Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 120,000 copies and by the Operations Department was 380,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department? A) $65,100 B) $68,600 C) $64,140 D) $67,640

A) $65,100

Consider the following information attributed to the material management department Budgeted usage of materials-handling labor-hours 3500 Budgeted cost pools: Fixed costs $154,000 Variable costs $126,000 (3500 hours x $36 per hour) The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments. Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month, what would be the allocation rate and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round final answers to the nearest dollar.) A) $80 an hour for a total of $40,000 B) $36 an hour for a total of $40,000 C) $36 an hour for a total of $18,000 D) $560 an hour for a total of $80

A) $80 an hour for a total of $40,000

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 150,000 to 250,000 technician hours per year: Fixed costs per year $8,600,000 Variable costs $75 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 90,000 technician hours Small Plane Department 160,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Large Plane Department? A) $9,846,000 B) $9,012,500 C) $7,658,000 D) $11,587,500

A) $9,846,000

Which of the following is a disadvantage of a dual-rate method? A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage. B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest. C) It allocates fixed and variable-cost pool using the same cost-allocation base, which will mislead managers in making decisions. D) It does not guide department managers to make decisions that benefit both the organization as a whole and each department.

A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.

Which of the following departments would not be considered a service or support department? A) assembly B) information systems C) shipping D) plant maintenance

A) assembly

The method that allocates each department's budgeted costs to operating departments only is called ________. A) direct method B) step-down method C) reciprocal method D) sequential method

A) direct method

Which of the following is not one of the methods used to to allocate the revenues of a bundled product? A) direct revenue method B) stand-alone selling prices method C) Stand-alone physical units method D) incremental revenue method

A) direct revenue method

When using the direct allocation method, a cost accountant would ________. A) not allocate support department costs to other support departments B) use information about reciprocal services provided among support departments and therefore could generate inaccurate estimates of the cost of operating departments C) allocate complete reciprocated costs D) allocate support department costs to other support departments

A) not allocate support department costs to other support departments

The best method to determining weights for the stand-alone revenue-allocation method is ________. A) selling prices revenue-allocation method because the weights explicitly consider the prices customers are willing to pay for the individual products B) unit cost revenue-allocation method because it can be used on all occasions C) the direct revenue-allocation method since selling prices or unit costs are difficult to calculate for individual products D) physical-units revenue-allocation method because the physical units explicitly value the prices customers are willing to pay for the individual products

A) selling prices revenue-allocation method because the weights explicitly consider the prices customers are willing to pay for the individual products

Which of the following is an example of an allowable cost considered by U.S. government contract? A) supervision costs B) costs of lobbying activities C) costs of alcoholic beverages D) costs of vacation for executives

A) supervision costs

Which of the following best describes the stand-alone revenue-allocation method? A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products B) ranks individual products in a bundle according to criteria determined by management C) ranks individual products in a bundle according to costs allocated to the products D) survey customers about the importance of each of the individual products in their purchase decision

A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 150,000 to 250,000 technician hours per year: Fixed costs per year $8,000,000 Variable costs $70 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 90,000 technician hours Small Plane Department 70,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs. A) $10,300,000 B) $10,100,000 C) $9,600,000 D) $10,800,000

B) $10,100,000

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 150,000 to 250,000 technician hours per year: Fixed costs per year $8,400,000 Variable costs $68 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 90,000 technician hours Small Plane Department 160,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours. If a single-rate cost-allocation method is used, what is the allocation rate per hour used? (Round the final answer to the nearest dollar.) A) $120.50 B) $101.60 C) $158.75 D) $77.12

B) $101.60

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $310,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $102,500 and $123,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Using the step-down method, what amount of Warehouse Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.) A) $33,856 B) $104,953 C) $125,393 D) $34,702

B) $104,953

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 150,000 to 250,000 technician hours per year: Fixed costs per year $7,200,000 Variable costs $71 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 90,000 technician hours Small Plane Department 70,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Small Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs. A) $13,920,000 B) $11,670,000 C) $10,370,000 D) $8,120,000

B) $11,670,000

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $360,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $188,000 and $282,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Using the direct method, what amount of Maintenance Department costs will be allocated to Department B? (Do not round any intermediary calculations.) A) $100,398 B) $128,168 C) $87,742 D) $167,330

B) $128,168

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $100,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $112,500 and $135,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Using the direct method, what amount of Warehouse Department costs will be allocated to Department Books? (Do not round any intermediary calculations.) A) $143,657 B) $206,343 C) $135,000 D) $170,679

B) $206,343

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Maintenance M (Support Dept) $350,000 Personnel P (Support Dept) $180,000 Weaving W (Weaving Dept) $660,000 Colorizing C (Colorizing Dept) $380,000 Services furnished: By Maintenance (budgeted labor-hours): to Personnel 1000 to Weaving 7600 to Colorizing 4500 By Personnel (Number of employees serviced): Plant Maintenance 6 Weaving 34 Colorizing 27 What is the complete reciprocated cost of the Personnel Department? (Do not round any intermediary calculations.) A) $170,000 B) $208,140 C) $180,000 D) $213,012

B) $208,140

Buzz'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: Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis. (Do not round any intermediary calculations.) A) $20.89 B) $37.00 C) $28.62 D) $35.69

B) $37.00

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) $380,000 Data Processing DP (Support Dept) $60,000 Machining M (Operating Dept) $210,000 Capping C (Operating Dept) $150,000 Services furnished: By Plant Maintenance (budgeted labor-hours): to Data Processing 3600 to Machining 5400 to Capping 8000 By Data Processing (budgeted computer time): to Plant Maintenance 800 to Machining 4200 to Capping 600 What is the complete reciprocated cost of the Plant Maintenance Department? (Do not round any intermediary calculations.) A) $411,143 B) $400,693 C) $440,000 D) $404,957

B) $400,693

Illumination Corp 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 2000 to 3000 hours: Fixed operating costs per year $480,000 Variable operating costs $700 per hour Budgeted long-run usage per year: Flashlight Division 1500 hours Night Light Division 600 hours Practical capacity 3000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1400 hours and by the Night Light Division was 700 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) $516,000 B) $586,000 C) $532,000 D) $602,000

B) $586,000

Emrald Corp currently uses a manufacturing facility costing $560,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 11%. If the incremental method were used, what amount of cost would be allocated to the start-up business? A) $50,400 B) $61,600 C) $62,160 D) $56,560

B) $61,600

Electro Corp sells a refrigerator and a freezer as a single package for $1120. Other data are in the chart below. Using the stand-alone method with stand-alone product revenues as the weight for revenue allocation, what amount will be allocated to the refrigerator? (Do not round any intermediary calculations.) A) $503.03 B) $647.58 C) $472.42 D) $560.00

B) $647.58

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $208,000 and $312,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: 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? (Do not round any intermediary calculations.) A) $31,079 B) $79,424 C) $49,640 D) $88,489

B) $79,424

Goldfarbs Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $137,500 and $165,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Using the direct method, what amount of Data Center Department costs will be allocated to Department Music? (Do not round any intermediary calculations.) A) $180,000 B) $83,505 C) $96,495 D) $75,349

B) $83,505

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) $370,000 Data Processing DP (Support Dept) $70,000 Machining M (Operating Dept) $235,000 Capping C (Operating Dept) $110,000 Services furnished: By Plant Maintenance (budgeted labor-hours): to Data Processing 3900 to Machining 5100 to Capping 8100 By Data Processing (budgeted computer time): to Plant Maintenance 700 to Machining 3500 to Capping 650 Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department? A) DP= $70,000 + (700 / 4850) PM B) DP= $70,000 + (3900/ 17,100) PM C) DP= $70,000 × (700 / 4850) + $370,000 × (3900 / 17,100) D) DP= $370,000 + (700 / 17,100) DP

B) DP= $70,000 + (3900/ 17,100) PM

Which of the following is a disadvantage of single-rate method? A) It is very costly to implement. B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest. C) It does not signal to department managers how variable costs and fixed costs behave differently. D) It requires managers to distinguish variable costs from fixed costs, which is often a challenging task.

B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest.

To discourage unnecessary use of a support department, management might ________. A) allocate user department costs based upon support department usage B) allocate support department costs based upon user department usage C) allocate a fixed amount of support department costs to each and every department D) allocate a fixed amount of user department costs to each and every department

B) allocate support department costs based upon user department usage

When using the dual-rate method, the fixed cost allocation is based on ________. A) actual rate B) budgeted usage C) incremental cost allocation D) prime cost allocation

B) budgeted usage

Which of the following methods ranks individual products in a bundle for revenue allocation? A) stand-alone revenue-allocation method B) incremental revenue-allocation method C) unit-cost weighting method D) physical-unit weighting method

B) incremental revenue-allocation method

Which of the following is an advantage of using practical capacity to allocate costs? A) is that it allows a downward supply spiral to develop B) is that it focuses managements attention on managing unused capacity C) is that budgets are much easier to develop D) is that it results in departments bearing a lower percentage of fixed costs

B) is that it focuses management's attention on managing unused capacity

Which of the following statements is true about the step-down method? A) it partially recognizes the services provided among support departments B) it does not recognize the total services that support departments provide to each other C) it is conceptually the most precise method D) it results in allocating only the support costs used by operating departments

B) it does not recognize the total services that support departments provide to each other

Which of the following is an example of a revenue object? A) suppliers B) products C) labor D) duration to complete a given task

B) products

Revenue allocation is used when ________. A) revenues cannot be estimated but can be traced to specific cost objects B) revenues are related to a particular revenue object but cannot be traced to it in an economically feasible way C) revenues are not related to a particular object but can be traced to that object in an economically feasible way D) revenue optimization is the goal

B) revenues are related to a particular revenue object but cannot be traced to it in an economically feasible way

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle. A) stand-alone revenue -allocation based on unit costs B) stand-alone revenue-allocation based on selling prices C) stand-alone revenue-allocation based on physical units D) stand-alone revenue-allocation based on unit costs

B) stand-alone revenue-allocation based on selling prices

Contract disputes regarding cost allocation can be reduced by defining which of the following? A) the material items allowed for production B) the terms used, such as what constitutes direct labor C) permissible tax deductions D) minimum profit level the company should earn

B) the terms used, such as what constitutes direct labor

Which of the following statements is false with regards to departmental cost allocations? A) amounts allocated to departments will most likely differ depending on the cost allocation method used B) the total amount allocated among departments will differ in total depending on the cost allocation method used C) the reciprocal method is usually the most conceptually precise method because it considers mutual services provided among all support departments D) the step-down and direct methods are simple for managers to compute and understand relative to the reciprocal method

B) the total amount allocated among departments will differ in total depending on the cost allocation method used

When budgeted cost-allocations rates are used ________. A) user departments are not informed about the charges until the end of the period which makes decision making during the period difficult B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource C) user divisions pay for costs that exceed budgeted amounts D) user divisions pay for inefficiencies of the supplier department

B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource

The dual-rate cost-allocation method classifies costs in each cost pool into a ________. A) budgeted-cost pool and an actual-cost pool B) variable-cost pool and a fixed-cost pool C) direct-cost pool and an indirect-cost pool D) direct-cost pool and a reciprocal-cost pool

B) variable-cost pool and a fixed-cost pool

The Charmatz 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 300,000 to 500,000 copies: Fixed costs per year $69,000 Variable costs 3 cents (0.03) per copy Budgeted long-run usage in copies per year: Marketing Department 100,000 copies Operations Department 360,000 copies Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 70,000 copies and by the Operations Department was 330,000 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. (Do not round interim calculations and round the final calculation to the nearest dollar.) A) $20,250 B) $18,000 C) $12,600 D) $2100

C) $12,600

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $200,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $142,500 and $171,000, 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 Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round intermediary calculations to three decimal places.) A) $144,992 B) $91,979 C) $123,487 D) $108,021

C) $123,487

Buzz'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: 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? (Do not round any intermediary calculations.) A) $16.51 B) $31.00 C) $23.33 D) $29.39

C) $23.33

Harbor Corp currently leases a corporate suite in an office building for a cost of $300,000 a year. Only 81% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 19% of the suite and increase the overall costs of maintaining the space by $28,139. If the stand-alone method were used, what amount of cost would be allocated to the start-up business? (Round the final answer to the nearest dollar.) A) $79,793 B) $57,000 C) $62,346 D) $51,654

C) $62,346

Electro Corp sells a refrigerator and a freezer as a single package for $1130. Other data are in the chart below. Using the stand-alone method with selling price as the weight for revenue allocation, what amount will be allocated to the refrigerator? (Do not round any intermediary calculations.) A) $565.00 B) $416.32 C) $713.68 D) $840.00

C) $713.68

Illumination 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 2000 to 3000 hours: Fixed operating costs per year $500,000 Variable operating costs $850 per hour Budgeted long-run usage per year: Flashlight Division 2000 hours Night Light Division 1000 hours Practical capacity 4000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 hours. If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division? A) $930,000 B) $950,000 C) $975,000 D) $780,000

C) $975,000

Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Maintenance M (Support Dept) $400,000 Personnel P (Support Dept) $150,000 Weaving W (Weaving Dept) $620,000 Colorizing C (Colorizing Dept) $360,000 Services furnished: By Maintenance (budgeted labor-hours): to Personnel 1000 to Weaving 8000 to Colorizing 4100 By Personnel (Number of employees serviced): Plant Maintenance 12 Weaving 36 Colorizing 23 Which of the following linear equations represents the complete reciprocated cost of the Personnel Department? A) P = $400,000 - $150,000 (1000 / 13,100) M B) P = (1000 / 13,100) M C) P = $150,000 + (1000 / 13,100) M D) P = $150,000

C) P = $150,000 + (1000 / 13,100) M

Which of the following is an example of a bundled product? A) a checking account B) A complete mechanics tool kit C) an accounting textbook with an access code to a homework/study system D) Microsoft Excel

C) an accounting textbook with an access code to a homework/study system

Which of the following would be an explicit agreement of reimbursement on a contract? A) contractor will produce a bill at the end of the contract without having disclose costs B) contractor will seek payment for contract without having to submit a bid or disclose a mark-up C) contractor agrees with customer before the project begins, on a set price D) Contractor will bill the customer based on what the contractor perceives to be the going rate

C) contractor agrees with customer before the project begins, on a set price

Which of the following would be the case under the stand-alone method of allocating common costs? A) the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those 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) the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users

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

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) fully incorporates interdepartmental relationships into the support-department cost allocations D) allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

C) fully incorporates interdepartmental relationships into the support-department cost allocations

Which of the following describes who the direct allocation method allocates support-department costs? A) it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments B) it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments C) it allocates each support-department's costs to operating departments only D) it requires managers to rank the support departments in the order that the step-down allocation is to proceed

C) it allocates each support-department's costs to operating departments only

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

C) practical capacity-based allocations are used

Which of the following is one of the methods of allocating support department costs to operating departments that partially recognizes mutual service provided among all support departments? A) dual-cost allocation method B) direct method C) sequential allocation method D) single-rate cost allocation method

C) sequential allocation method

The method that allocates costs in each cost pool using the same rate per unit is known as the ________. A) incremental cost-allocation method B) reciprocal cost-allocation method C) single-rate cost allocation method D) dual-rate cost-allocation method

C) single-rate cost allocation method

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 each other and operating departments D) the same cost-allocation base is used among various support departments

C) support departments provide reciprocal services to each other and operating departments

Cost-plus contracts negotiated with suppliers of the government usually involves ________. A) a price that allows the contractor to break-even B) a price that covers the contract's cost plus other non cash benefits C) the supplier's cost to perform the contact (provide the product or service) plus a fee D) a price that covers the contractor's direct costs plus an amount to cover overhead costs

C) the supplier's cost to perform the contact (provide the product or service) plus a fee

When actual cost-allocations rates are used, which of the following would be true? A) user divisions pay for costs that exceed budgeted amounts B) managers of the supplier division are motivated to improve efficiency C) user divisions are unaware of the allocated amounts until the end of the budget period D) managers know with certainty the rates to be used in that budget period

C) user divisions are unaware of the allocated amounts until the end of the budget period

Managers of supplier departments ________. A) view the budgeted rates positively if unfavorable cost variances occur due to price decreases outside of their control B) view the budgeted rates negatively if favorable cost variances occur due to price decreases outside of their control C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control D) view the budgeted rates negatively if unfavorable cost variances occur due to price decreases outside of their control

C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $320,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 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 Center 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) A) $62,182 B) $180,000 C) $24,393 D) $0

D) $0

Illumination 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 2000 to 3000 hours: Fixed operating costs per year $500,000 Variable operating costs $900 per hour Budgeted long-run usage per year: Flashlight Division 2000 hours Night Light Division 1000 hours Practical capacity 4000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 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) $2,050,000 B) $1,850,000 C) $1,200,000 D) $1,537,500

D) $1,537,500

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 100,000 to 200,000 technician hours per year: Fixed costs per year $8,200,000 Variable costs $74 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 90,000 technician hours Small Plane Department 110,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department? A) $14,153,333 B) $10,293,333 C) $9,200,000 D) $12,650,000

D) $12,650,000

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $170,000 are allocated based on the number of employees. The costs of operating departments A and B are $188,000 and $282,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Using the direct method, what amount of Personnel Department costs will be allocated to Department B? (Do not round any intermediary calculations.) A) $44,737 B) $50,000 C) $107,368 D) $120,000

D) $120,000

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $184,000 and $276,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: 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? (Do not round any intermediary calculations.) A) $231,452 B) $121,677 C) $50,111 D) $159,444

D) $159,444

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) $320,000 Data Processing DP (Support Dept) $100,000 Machining M (Operating Dept) $245,000 Capping C (Operating Dept) $140,000 Services furnished: By Plant Maintenance (budgeted labor-hours): to Data Processing 3600 to Machining 5000 to Capping 8800 By Data Processing (budgeted computer time): to Plant Maintenance 750 to Machining 3700 to Capping 800 What is the complete reciprocated cost of the Data Processing Department? (Do not round any intermediary calculations.) A) $220,000 B) $120,690 C) $149,210 D) $171,269

D) $171,269

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $310,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $190,000 are allocated based on the number of employees. The costs of operating departments A and B are $200,000 and $300,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Using the direct method, what amount of Maintenance Department costs will be allocated to Department A? (Do not round any intermediary calculations.) A) $145,277 B) $334,211 C) $133,684 D) $207,211

D) $207,211

Buzz'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: 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. (Do not round any intermediary calculations.) A) $20.07 B) $30.93 C) $27.00 D) $24.00

D) $24.00

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 100,000 to 200,000 technician hours per year: Fixed costs per year $7,400,000 Variable costs $75 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 80,000 technician hours Small Plane Department 120,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a single-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume actual usage is used to allocate laboratory costs. A) $10,228,571.4 B) $8,960,000 C) $7,671,429 D) $6,720,000

D) $6,720,000

The Charmatz 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 300,000 to 500,000 copies: Fixed costs per year $66,000 Variable costs 5 cents (0.05) per copy Budgeted long-run usage in copies per year: Marketing Department 110,000 copies Operations Department 390,000 copies Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 120,000 copies and by the Operations Department was 360,000 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) $69,000 B) $117,000 C) $70,980 D) $69,480

D) $69,480

Emrald Corp currently uses a manufacturing facility costing $520,000 per year; 85% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 15% of the facility and increase the overall costs of maintaining the space by 12%. If the stand-alone method were used, what amount of cost would be allocated to the start-up business? A) $75,660 B) $78,000 C) $66,300 D) $87,360

D) $87,360

Which of the following is an advantage of a dual-rate method? A) It is the most widely used method in practice. B) It is less costly to implement. C) It avoids the expensive analysis for categorizing costs as either fixed or variable. D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.

D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.

Corny Solutions processes various corn related food items. One of its facilities located in Iowa, performs some initial processing of corn on the cob once it arrives from the corn fields. The corn from that facility will be further processed elsewhere into corn for popping and corn meal. The costs incurred at the Iowa plant would be considered ________. A) combined costs B) distinct costs C) fixed costs D) common costs

D) common costs

Which of the following would be considered the biggest advantage of using practical capacity to allocate costs? A) focuses the users division with the costs of overused capacity B) never causes over or under-allocated overhead C) burdens the user divisions with the costs of unused capacity D) focuses managements attention on unused capacity

D) focuses managements attention on unused capacity

In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because ________. A) the government taxes the defense companies at a higher level than that of other public sector companies B) there is an implicit agreement among defense contractors to "share contracts" C) all defense contractors have essentially the same cost structure D) no contractor is willing to assume all the risk of receiving a fixed price for the contract

D) no contractor is willing to assume all the risk of receiving a fixed price for the contract

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

D) stand-alone product revenues

Which of the following describes reciprocal support? A) the accounting department provides services to production B) molding provides services to production and accounting provides services to both molding and production C) assembling department provides services to three other departments D) the materials management department provides support to all departments including the production control department which also provides services to the materials management department

D) the materials management department provides support to all departments including the production control department which also provides services to the materials management department

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) the first-incremental user bears a higher proportion of the cost in comparison with the primary user D) the primary user bears the maximum of the total cost

D) the primary user bears the maximum of the total cost

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 divisions usage affect another divisions allocation

D) variations in one divisions usage affect another divisions allocation

Give examples of bundled products for each of the following industries: a. Resort hotel b. Bank c. Restaurant d. Computer store e. Super markets f. Personal care products manufacturer

a. Hotel room plus meals, free drinks, use of athletic facilities, morning newspaper b. Checking account, safe deposit box, wire transfers, certified checks, travelers checks c. Fixed-price meal includes a beverage, appetizer, entree, and dessert d. Computer, keyboard, monitor, printer, software, 1-year contract for the repair and maintenance of the computer e. Vegetables, fruits, electronic goods etc. f. Shaving gel, razors, and after shave cream