Ch 7 - Assessment Test

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

managers may tend to overconsume these services

Support departments

provide essential services to the producing departments.

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?

purchasing department costs based on machine hours

Which of the following is a by-product?

sawdust

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

sequential method

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

square feet

Rules of financial reporting (GAAP) require

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

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?

the company may elect not to supply the service internally

The split-off point can best be defined as

the point at which joint products become separate and identifiable

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

to detect fraud

A common cost occurs

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

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

Guideline of cause and effect

Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2018 for its three departments: Sportswear Sales $160,000 Direct advertising costs $7,000 Newspaper ad space 62% Lingerie Sales $120,000 Direct advertising costs $12,000 Newspaper ad space 20% Appliances Sales $120,000 Direct advertising costs $3,000 Newspaper ad space 18% How much of the indirect advertising costs will be allocated to the Sportswear Department if newspaper ad space is the activity driver?

$3,720

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 Using the direct method, the cost of the Personnel Department allocated to Department P1 is:

$2,250

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 Using the direct method, the cost of the Maintenance Department allocated to Department P1 is:

$20,000

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

# of employees

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, what would be the charge per page? (Round to the nearest cent.)

$0.25

Astoria Savings & Loans of New York has three revenue-generating departments: Consumer accounts, Commercial accounts, and Loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: Percentage of Service Used By Dept. Administration Costs $40K Admin Pers 10 Acctg 10 Check 40 Sav 20 Loans 20 Personnel Costs $23K Admin 10 Pers 10 Acctg Check 20 Sav 40 Loans 20 Accounting Costs $30K Admin 10 Pers 10 Acctg 10 Check 20 Sav 20 Loans 40 Checking Costs $41K Admin Pers Acctg Check Sav Loans Savings Costs $25K Admin Pers Acctg Check Sav Loans Loans Costs $16K Admin Pers Acctg Check Sav Loans How much cost would be allocated to the Commercial account area from administration using the direct method?

$10,000

Aquamarine company incurred $20,000 of common fixed costs and $80,000 of common variable costs. These costs are to be allocated to its two departments: Department A and Department B. Data on capacity provided and capacity used by the two departments follows: Dept A Capacity Provided 600 Capacity Used 550 Dept YY Capacity Provided 600 Capacity Used 450 Common fixed costs are allocated to Departments A and B on the basis of capacity provided, and common variable costs are allocated to Departments A and B on the basis of capacity used. The fixed and variable costs allocated to Department A are:

$12,000 and $44,000, respectively.

If a support department's costs were budgeted to be $150,000 and actual costs incurred by the support department were $200,000, the total amount of the support department's costs that should be allocated to other departments is

$150,000

Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (brochures made) are as follows: Brochure center 1 normal activity 1.2M actual activity 1M Brochure center 2 normal activity 800K actual activity 880K Support department costs NOT allocated to the two brochure centers are:

$16.8K

Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $34 per trip Fixed costs $143,360 Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips, what will the West Sales Territory be charge for the year?

$21,320

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to

$21,750

Copies Plus Print operates a copy business at different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are:

$24,000

The following information pertains to Longboat Company: ***Support Depts Personnel Budgeted O/H $40K Direct labor hrs 2K Machine Hrs # of ees 4 Maintenance Budgeted O/H $72K Direct labor hrs 2.5K Machine Hrs # of ees 5 ***Producing Depts Fabrication Budgeted O/H $140K Direct labor hrs 8K Machine Hrs 12K # of ees 15 Assembly Budgeted O/H $160K Direct labor hrs 10K Machine Hrs 8K # of ees 25 Longboat Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round amounts to dollars.) If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

$24.78

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

$27,250

The following information pertains to Famous Company: ***Support Depts Personnel Budgeted O/H $40K Direct labor hrs 2K Machine Hrs # of ees 4 Maintenance Budgeted O/H $72K Direct labor hrs 2.5K Machine Hrs # of ees 5 ***Producing Depts Fabrication Budgeted O/H $140K Direct labor hrs 8K Machine Hrs 12K # of ees 15 Assembly Budgeted O/H $160K Direct labor hrs 10K Machine Hrs 8K # of ees 25 Famous Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

$28,800

Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $34 per trip Fixed costs $143,360 Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Using a single charging rate, how much will be charged to the West Sales Territory?

$29,000

Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $34 per trip Fixed costs $143,360 Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Using a single charging rate, determine the rate per trip

$290

Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2018 for its three departments: Sportswear Sales $160,000 Direct advertising costs $7,000 Newspaper ad space 62% Lingerie Sales $120,000 Direct advertising costs $12,000 Newspaper ad space 20% Appliances Sales $120,000 Direct advertising costs $3,000 Newspaper ad space 18% How much of the indirect advertising costs will be allocated to the Lingerie Department if direct advertising costs is the activity driver? (Round to the nearest dollar if necessary)

$3,273

Cumadin Corporation, which manufactures Products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2018: Product W Units products 10K Sales Value@Split-Off $5.5K X Units products 6K Sales Value@Split-Off $2.5K Y Units products 16K Sales Value@Split-Off $3K Z Units products 8K Sales Value@Split-Off $4.5K What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?

$3,600

Andover, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: Support department hours used: Department L 12,000 Department M 4,000 Total hours 16,000 Support department costs: Actual support department costs $48,000 Budgeted fixed department costs 20,000 Budgeted variable rate per hour 2.50 Normal support department usage is 8,000 hours each for Department L and Department M. Assuming the direct method is used and the purpose is product costing, support department costs allocated to Department L are

$30,000

Copies Plus Print operates a copy business at different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are:

$36,000

Andover, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: Support department hours used: Department L 12,000 Department M 4,000 Total hours 16,000 Support department costs: Actual support department costs $48,000 Budgeted fixed department costs 20,000 Budgeted variable rate per hour 2.50 Normal support department usage is 8,000 hours each for Department X and Department Y. Assuming the direct method is used and the purpose is performance evaluation, support department costs allocated to Department X are

$40,000

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 Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (Round to the nearest cent.)

$47,500

Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (brochures made) are as follows: Brochure center 1 normal activity 1.2M actual activity 1M Brochure center 2 normal activity 800K actual activity 880K For purpose of performance evaluation, fixed costs allocated to Brochure Center 2 are:

$48,000

Sigma, Inc., has two support departments, the Administrative Department and the Personnel Department, and two producing departments, the Machining Department and the Blending Department. The Administrative Department costs of $50,000 are allocated on the basis of standard service used. The Personnel Department costs of $10,000 are allocated on the basis of number of employees. The direct costs of Machining Department and Blending Department are $30,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows: Std service hours used Admin dept 200 Personnel dept 100 Machining dept 150 Blending dept 150 # of ees Admin dept 10 Personnel dept 20 Machining dept 15 Blending dept 10 Direct labor hours Admin dept 100 Personnel dept 80 Machining dept 150 Blending dept 200 Using the direct method, allocate the costs of the Administrative and Personnel departments to the Machining departments.

$54,750

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 What is the combined total department costs for the producing departments after allocation of the support departments?

$58,500

The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: Percentage of Service Used By Dept. Administration Costs $40K Admin Pers 10 Acctg 10 Check 40 Sav 20 Loans 20 Personnel Costs $23K Admin 10 Pers 10 Acctg Check 20 Sav 40 Loans 20 Accounting Costs $30K Admin 10 Pers 10 Acctg 10 Check 20 Sav 20 Loans 40 Checking Costs $41K Admin Pers Acctg Check Sav Loans Savings Costs $25K Admin Pers Acctg Check Sav Loans Loans Costs $16K Admin Pers Acctg Check Sav Loans The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration, personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method? (Round to two decimal places.)

$6000

Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made. During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000. Normal and actual activity (brochures made) are as follows: Brochure center 1 normal activity 1.2M actual activity 1M Brochure center 2 normal activity 800K actual activity 880K For purposes of performances evaluation, fixed costs allocated to Brochure center 1 are:

$72,000

If a support department's costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department's costs that should be allocated to other departments is

$75,000

Copies Plus Print operates a copy business at different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 Support department costs NOT allocated to the two copy centers are:

$8,400

Hunghi Company has three support departments whose direct department costs are $35,000, $45,000, and $55,000, respectively, and two producing departments whose direct department costs are $400,000 and $360,000, respectively. The combined total department cost for the producing departments are allocation of the support departments is

$895,000

Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet. Data on direct department costs, number of employees, and space occupied are as follows: S1 Direct dept costs $7.5K # of ees 10 Space occupied (sq. ft) 1K S2 Direct dept costs $11K # of ees 5 Space occupied (sq. ft) 500 P1 Direct dept costs $27.5K # of ees 20 Space occupied (sq. ft) 1.5K P2 Direct dept costs $30K # of ees 25 Space occupied (sq. ft) 2.5K If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

1,500/4,000

Long Distance Company's travel department had the following budgeted costs for the coming year: Variable costs $34 per trip Fixed costs $143,360 Yearly Trips Monthly Peak Trips West Sales Territory 110 trips 5 Midwest Sales Territory 170 trips 12 Southern Sales Territory 150 trips 15 Eastern Sales Territory 130 trips 8 The actual usage is given below: West Sales Territory 100 trips Midwest Sales Territory 150 trips Southern Sales Territory 160 trips Eastern Sales Territory 140 trips Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.

12.5%; $34

Fairfield Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: Building Space occupied 2K sq ft Ees 6 Personnel Space occupied 10K sq ft Ees 10 Dept P1 Space occupied 120K sq ft Ees 80 Dept P2 Space occupied 70K sq ft Ees 50 If Fairfield Company uses the direct allocation method, the ratio representing the portion of building costs allocated to Department P1 is

120,000/190,000

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 # of employees 10 20 90 90 Direct labor hours 50 50 250 250 Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the Maintenance Department allocated to Department P1 is

18,000

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

Reciprocal method

Tec-Pro Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet. Data on direct department costs, number of employees, and space occupied are as follows: S1 Direct dept costs $7.5K # of ees 10 Space occupied (sq. ft) 1K S2 Direct dept costs $11K # of ees 5 Space occupied (sq. ft) 500 P1 Direct dept costs $27.5K # of ees 20 Space occupied (sq. ft) 1.5K P2 Direct dept costs $30K # of ees 25 Space occupied (sq. ft) 2.5K When Tec-Pro uses the sequential method, the support department allocated first is the one with the highest percentage of interdepartmental service. The choice of the department allocated first is determined by the comparison of the following ratio for S1 and S2, respectively:

5/50; 1,000/5,000

McHugh Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: Building Space occupied 2K sq ft Ees 6 Personnel Space occupied 10K sq ft Ees 10 Dept P1 Space occupied 120K sq ft Ees 80 Dept P2 Space occupied 70K sq ft Ees 50 If McHugh Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is

50/130

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 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?

All of these choices are correct

The major objective(s) of allocations are

All of these choices are correct

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

All of these choices are objectives of allocation

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

Assembly

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

Budgeted rate × Actual usage.

Causal factors are variables or activities within a producing department that stimulate the incurrence of support costs.

True

Common costs are mutually beneficial costs, used in the output of two or more services or products.

True

Producing departments create products and services to make and sell

True

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

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

Allocation increases total costs.

False

Producing departments provide essential services for support departments.

False

A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows: Dept A Capacity Provided 600 Capacity Used 550 Dept YY Capacity Provided 600 Capacity Used 450 Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are

Fixed $40,000 Variable 60,000

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows: Dept XX Capacity Provided 500 Capacity Used 400 Dept YY Capacity Provided 300 Capacity Used 400 Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department XX are

Fixed $60,000 Variable $90,000

A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows: Dept XX Capacity Provided 500 Capacity Used 400 Dept YY Capacity Provided 300 Capacity Used 400 Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used. The fixed and variable costs allocated to Department XX are

Fixed $75,000 Variable $90,000

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

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

Examples of support departments include all of the following EXCEPT

Machining

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

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

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

Personnel

Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What is S1's cost equation?

S1 = $15,000 + 0.06S2

Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively. What is S2's cost equation?

S2 = $8,000 + 0.10S1

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

The direct allocation method

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

The physical units method

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

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

Joint costs are

allocated arbitrarily

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

budgeted costs, not actual costs, should be allocated

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

budgeted rate x budgeted usage

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

by-product

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

causal factors

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

common cost

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 percentage. Each product is then assigned the same cost of goods sold percentage.

constant gross margin method

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

departmental overhead rates

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

joint costs

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

joint products

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

machine hours

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

maintenance