CH 7 ACC 3377 Multiple choice

If the allocation is for product costing, the allocation of variable support department costs would be calculated as

d. Budgeted rate × Budgeted usage.

Which of the following guidelines must be considered while determining the basis to be used to allocate support department costs?

d. Guideline of cause and effect

Examples of support departments include all of the following EXCEPT

c. machining.

A possible causal factor to use when allocating cafeteria costs would be

c. number of employees.

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?

c. personnel

The activities or variables within a producing department that provoke the incurrence of support costs are called:

a. Causal factors

Products with substantial value which are produced simultaneously by the same process up to a split-off point are called:

a. Joint products

Which of the following cost allocation methods allocates support department costs only to the producing departments?

a. The direct allocation method

Which joint cost allocation method is described by the following statement?Overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage.

a. constant gross margin method

Which of the following methods allocates a joint cost such that each product has the same cost of goods sold percentage?

a. constant gross margin percentage method

The cost of crude oil used in producing gasoline products is an example of

a. joint costs.

Which of the following would be the most appropriate base for allocating the costs of the maintenance department?

a. machine hours

Which joint cost allocation method is described by the following statement?Joint cost is prorated to the products on the basis of each product's share of units.

a. physical units method

Which of the following allocation methods fully recognizes services that support departments provide to each other?

a. reciprocal method

The sales-value-at-split-off method allocates joint production costs based on each product's share of

a. sales value revenues have not been realized at the split-off point.

Rules of financial reporting (GAAP) require

a. that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products.

Which of the following is NOT a major objective of allocation as identified by the IMA?

a. to detect fraud

Which of the following joint cost allocation methods recognizes that costs incurred after the split-off point are part of the cost total on which profit is expected to be earned?

b. The constant gross margin percentage method

Which of the following methods of cost allocation based on market value is used when there is no ready market price available for the individual products at the split-off point?

b. The net realizable value method

Support department costs are accounted for in which one of the following ways?

b. They are allocated to producing departments and then allocated to units of product.

Basic guidelines that should be followed when allocating support department costs include

b. budgeted costs, not actual costs, should be allocated.

The support department costs allocated to producing departments is assigned to individual products through the use of:

b. departmental overhead rates.

Which of the following cost categories would most likely use machine hours as its activity driver?

b. maintenance

What is one of the potential disadvantages of NOT allocating support department costs to production departments?

b. managers may tend to over consume these services

Which of the following methods allocates joint production costs based on the pounds of product produced?

b. physical units method

The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?

b. purchasing department costs based on machine hours

Which of the following allocation methods assumes "step-down" interdepartmental services?

b. sequential method

The split-off point can best be defined as

b. the point at which joint products become separate and identifiable.

If the allocation is for performance evaluation, the allocation of variable support department costs would be calculated as

c. Budgeted rate × Actual usage.

Which of the following would NOT be a criteria used to rank departments to determine order of allocation under the sequential method?

c. Determine the total cost of a support department, both direct and allocated from other support departments, before ranking.

Which of the following statements is true of the allocation of fixed support department costs?

c. It should be allocated based on the practical capacity of user departments.

What is the most likely action to be taken by a company when a support department is NOT as cost effective as an outside source?

c. The company may elect not to supply the service internally.

Which of the following is an advantage of the relative market value approach to joint cost allocation?

c. The relative market value approach to joint cost allocation will not produce consistently profitable or unprofitable items.

Joint costs are

c. allocated arbitrarily.

A secondary product recovered in the course of manufacturing a primary product during a joint process is called a:

c. by-product

Which of the following would be the most appropriate base for allocating the costs of the housekeeping department?

c. square feet

A common cost occurs

c. when the same resource is used in the output of two or more outputs.

Which of the following is an example of a producing department in a manufacturing firm?

d. Assembly

Which of the following is NOT a benefit of the costs of support departments being allocated to production departments?

d. Management will use the information to support out-sourcing all support services.

Which of the following methods of joint cost allocation serves the purpose of product costing?

d. The physical units method

Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization?

d. all of the above are objectives of allocation

Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust.

d. all of the above.

The major objective(s) of allocations are

d. all of the above.

Support department cost to the producing departments is(are) called:

d. common cost

A joint cost allocation method that would assign the same amount of cost per unit to two joint products that sell for $10 and $40, respectively, is the

d. physical unit method.

Support departments

d. provide essential services to the producing departments.

Which of the following is a by-product?

d. sawdust