ACC 377 Multiple Choice Chp.7

. 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. b. costs realized at the split-off point. c. final sales value less further processing costs after the split-off point. d. units produced at the split-off point.

a

Products with substantial value which are produced simultaneously by the same process up to a split-off point are called: a. Joint products b. Minor products c. By-products d. Both a and b

a

Rules of financial reporting (GAAP) require a. that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products. b. that only producing department costs be assigned to products. c. that only direct manufacturing costs be assigned to products. d. that only indirect manufacturing costs be assigned to products.

a

The activities or variables within a producing department that provoke the incurrence of support costs are called: a. Causal factors b. Common costs c. Cost objectives d. Activity output

a

The cost of crude oil used in producing gasoline products is an example of a. joint costs. b. a by-product. c. joint products. d. common cost allocation.

a

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 b. weighted average method c. sales-value-at-split-off method d. net realizable value method

a

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. Each product is then assigned the same cost of goods sold percentage. a. constant gross margin method b. weighted average method c. sales-value-at-split-off method d. net realizable method

a

Which of the following allocation methods fully recognizes services that support departments provide to each other? a. reciprocal method b. sequential method c. direct method d. all of the above

a

Which of the following cost allocation methods allocates support department costs only to the producing departments? a. The direct allocation method b. The reciprocal allocation method c. The proportional allocation method d. The step allocation method

a

Which of the following is NOT a major objective of allocation as identified by the IMA? a. to detect fraud b. to obtain a mutually agreeable price c. to compute product-line profitability d. to value inventory

a

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 b. net realizable value method c. physical units method d. replacement cost method

a

Which of the following would be the most appropriate base for allocating the costs of the maintenance department? a. machine hours b. direct labor hours c. number of employees d. square feet

a

. 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? a. The sales-value-at-split-off method b. The constant gross margin percentage method c. The physical units method d. The relative market value method

b

Basic guidelines that should be followed when allocating support department costs include a. actual costs should always be used for allocations. b. budgeted costs, not actual costs, should be allocated. c. service department costs should never be allocated at the beginning of the period. d. both a and b.

b

Support department costs are accounted for in which one of the following ways? a. They are allocated directly to units of product. b. They are allocated to producing departments and then allocated to units of product. c. They are allocated to units of product and then allocated to the producing departments. d. They are expensed as incurred.

b

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? a. personnel department costs based on number of employees b. purchasing department costs based on machine hours c. cafeteria costs based on meals served d. warehouse costs based on the value of materials stored

b

The split-off point can best be defined as a. the point at which a secondary product is recovered in the course of manufacturing a primary product. b. the point at which joint products become separate and identifiable. c. the point in the production process where no further processing is needed. d. the point at which you can get more of one product and less of another product.

b

The support department costs allocated to producing departments is assigned to individual products through the use of: a. plantwide overhead rates. b. departmental overhead rates. c. direct labor rate per hour. d. direct material cost per unit.

b

What is one of the potential disadvantages of NOT allocating support department costs to production departments? a. total costs would not be accumulated b. managers may tend to overconsume these services c. this would encourage managers to monitor support department performance d. managers will use a support service at a more efficient level

b

Which of the following allocation methods assumes "step-down" interdepartmental services? a. direct method b. sequential method c. reciprocal method d. all of the above

b

Which of the following cost categories would most likely use machine hours as its activity driver? a. personnel b. maintenance c. purchasing d. both a and b

b

Which of the following methods allocates joint production costs based on the pounds of product produced? a. sales-value-at-split-off method b. physical units method c. constant gross margin percentage method d. replacement cost method

b

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? a. The physical units method b. The net realizable value method c. The sales-value-at-split-off method d. The constant gross margin percentage method

b

A common cost occurs a. when only one product or service is benefited. b. when different resources are used to produce one output. c. when the same resource is used in the output of two or more outputs. d. when a resource is used by two or more companies.

c

A possible causal factor to use when allocating cafeteria costs would be a. number of square feet. b. number of direct labor hours. c. number of employees. d. appraised value of square footage.

c

A secondary product recovered in the course of manufacturing a primary product during a joint process is called a: a. main product b. joint product c. by-product d. both a and c

c

Examples of support departments include all of the following EXCEPT a. maintenance. b. personnel. c. machining. d. data processing.

c

If the allocation is for performance evaluation, the allocation of variable support department costs would be calculated as a. Actual rate × Actual usage. b. Actual rate × Budgeted usage. c. Budgeted rate × Actual usage. d. Budgeted rate × Budgeted usage.

c

Joint costs are a. separable. b. allocated on the basis of cause and effect relationships. c. allocated arbitrarily. d. all of the above.

c

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? a. The company may force managers to use the internal support department. b. The company may force managers to use an external source for the service. c. The company may elect not to supply the service internally. d. all of the above

c

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver? a. maintenance b. purchasing c. personnel d. accounting

c

Which of the following is an advantage of the relative market value approach to joint cost allocation? a. The relative market value approach to joint cost allocation ensures that each joint product is marketed profitability. b. The weighted factors used by the relative market value approach for joint cost allocation ensure that the jointly produced products are profitable. c. The relative market value approach to joint cost allocation will not produce consistently profitable or unprofitable items. d. The relative market value approach to joint cost allocation will ensure that allocated costs remain constant.

c

Which of the following statements is true of the allocation of fixed support department costs? a. It should be allocated only to other support departments of a firm. b. It should be allocated only to the user departments making maximum use of support departments. c. It should be allocated based on the practical capacity of user departments. d. It should be allocated based on the direct labor hours used by support departments.

c

Which of the following would NOT be a criteria used to rank departments to determine order of allocation under the sequential method? a. Rank the supporting departments in order of the amount of service rendered, from the greatest to the least. b. Rank the supporting departments in order of the support services rendered, measured by the direct costs of each support department with the department with the highest cost rendering the greatest service. c. Determine the total cost of a support department, both direct and allocated from other support departments, before ranking. d. Rank the supporting departments based on a percentage of service they render to other service departments.

c

Which of the following would be the most appropriate base for allocating the costs of the housekeeping department? a. machine hours b. direct labor hours c. square feet d. number of employees

c

. Which of the following guidelines must be considered while determining the basis to be used to allocate support department costs? a. Guideline of revenue generation b. Guideline of goal congruence c. Guideline of profit maximization d. Guideline of cause and effect

d

. Which of the following methods of joint cost allocation serves the purpose of product costing? a. The net realizable value method b. The sales-value-at-split-off method c. The weighted average method d. The physical units method

d

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 a. sales-value-at-split-off method. b. direct allocation method. c. net realizable value method. d. physical unit method.

d

Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use 165,000 and 35,000 from the trust area. Assuming a single charging rate is used, if the total pages printed were 340,000, which of the following statements is correct? a. The printing costs allocated to all departments would be $85,000. b. The printing department would expect to incur costs of $82,790. c. Any extra amount charged is due to the fixed costs being charged as if they were variable costs. d. all of the above.

d

If the allocation is for product costing, the allocation of variable support department costs would be calculated as a. Actual rate × Actual usage. b. Actual rate × Budgeted usage. c. Budgeted rate × Actual usage. d. Budgeted rate × Budgeted usage.

d

Support department cost to the producing departments is(are) called: a. direct materials b. direct labor c. activity driver d. common cost

d

Support departments a. are responsible for manufacturing the products sold to customers. b. work directly on the products of the firm. c. provide services directly to customers. d. provide essential services to the producing departments.

d

The major objective(s) of allocations are a. to motivate managers. b. to compute product line profitability. c. to value inventory. d. all of the above.

d

Which of the following is NOT a benefit of the costs of support departments being allocated to production departments? a. The allocation assists producing departments' use of support departments at a more efficient level. b. Allocation of support department costs encourages managers of production departments to monitor performance of the support department. c. The allocation helps each department select the correct level of support service consumption. d. Management will use the information to support out-sourcing all support services.

d

Which of the following is a by-product? a. lumber b. fresh fish c. whole milk d. sawdust

d

Which of the following is an example of a producing department in a manufacturing firm? a. Materials storeroom b. Maintenance c. Cafeteria d. Assembly

d

Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization? a. to obtain a mutually agreeable price b. to compute product-line profitability c. to predict the economic effects of planning and control d. all of the above are objectives of allocation

d