Allocation of Support Departments
Benefits of the single-rate method include: a. the low cost of implementation & EASIER TO CALCULATE 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
a
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) All of these answers are correct.
a
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
a
________ 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
a
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 used for step-down allocations D) are also referred to as budgeted costs
b
The advantage of using practical capacity to allocate costs: A) is that it allows a downward demand spiral to develop B) is that it focuses management's attention on managing unused capacity C) is that budgets are much easier to develop D) Either A or B are correct.
b
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. used-capacity-cost pool and a practical-capacity-cost pool d. direct-cost pool and a reciprocal-cost pool
b
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
b
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
b
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
b
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
b
________ 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
b
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
c
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
c
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
The method that allocates costs by explicitly including all the services rendered among all support departments is the: A) direct method B) step-down method / Sequential C) reciprocal method / Matrix D) sequential method
c
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
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
c
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
c
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
c
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
d
All contracts with U.S. government agencies must comply with cost accounting standards issued by the: A) FASB B) SEC C) IRS D) CASB
d
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
d
Contract disputes regarding cost allocation can be reduced by defining: A) the cost items allowed B) the terms used, such as what constitutes direct labor C) permissible cost-allocation bases D) All of these answers are correct.
d
The biggest advantage of using practical capacity to allocate costs is that it: A) is a value that is readily available B) never causes over or under-allocated overhead C) burdens the user divisions with the costs of unused capacity D) focuses management's attention on unused capacity
d
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
d
The single-rate cost-allocation method may base the denominator choice on: a. master-budget capacity utilization b. normal capacity utilization c. practical capacity d. All of these answers are correct.
d
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
d
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
d
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
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 are correct.
d