Cost Accounting - Ch.15 T/F

Budgeted amounts for a support department will always exceed complete reciprocated costs for that department.

F

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

F

The direct allocation method highlights recognition of services rendered by support departments to other support departments.

F

The direct allocation method provides key information for outsourcing decisions regarding support services.

F

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

F

The incremental method of allocating common costs often creates the incentive to be the first-ranked user.

F

The single-rate cost-allocation method provides better information for decision making than the dual-rate method.

F

Under the incremental method, the first incremental user usually receives the highest allocation of the common costs.

F

When budgeted cost-allocation rates are used, user-division managers face uncertainty about the allocation rates for that budget period.

F

When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.

F

All contracts with U.S. government agencies must comply with the cost accounting standards issued by the Cost Accounting Standards Board.

T

An example of a bundled product is when a resort hotel charges a single price for lodging, food, and recreational activities.

T

Revenue allocation is required to determine the profitability of individual items within a bundled product.

T

The reciprocal allocation method incorporates mutual services provided among all support departments.

T

The stand-alone method may use selling price or unit costs to allocate revenues.

T

The stand-alone method of allocating common costs emphasizes fairness and equity among users.

T

Under the incremental revenue-allocation method, there is an incentive to be the first-ranked user.

T

Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

T

When budgeted cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency.

T

Without explicit written cost-plus contracts, producer costs can be passed on to the buyer.

T