cost ch 11

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the: A. replacement method. B. physical quantities method. C. net realizable value method. D. units produced method.

C. net realizable value method.

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. What is the Accounting Department's cost allocated to Department B using the direct method? A. $40,000. B. $80,000. C. $20,000. D. $10,000.

A. $40,000.

Which of the following statements is true regarding the use of multiple cost-pools? A Organizations might implement multiple cost pools when the uses of the service resources have both . facility-level and unit-level components. B. Designing and maintaining multiple cost pools is a relatively simple undertaking. C. The benefits of using multiple cost pools always outweigh the costs of setting them up. D. Both resources supplied and resources used are allocated with multiple cost pools.

A Organizations might implement multiple cost pools when the uses of the service resources have both . facility-level and unit-level components.

Which of the following statements is false? A The estimated net realizable value for a product is its estimated selling price after processing the . product beyond the split-off point. B. In general, it is better to use a product's market value at the split-off point than its estimated net realizable value. CThe estimated net realizable value at the split-off point is calculated by taking the sales value after . further processing and deducting the additional processing costs. D. It is better to use the net realizable value method for allocating joint costs than the estimated net realizable value method.

A The estimated net realizable value for a product is its estimated selling price after processing the . product beyond the split-off point.

Bagley Company has two service departments and two producing departments. Square footage of space occupied by each department follows: The department costs of Custodial Services are allocated on a basis of square footage of space. If Custodial Services costs are budgeted at $38,000, the amount of cost allocated to General Administration under the direct method would be: A. $0. B. $7,125. C. $6,000. D. $5,700.

A. $0.

Raymer Corporation produced 3,660 units, consisting of three separate products, in a joint process for the year. The market for these products was so unstable that it was not practical to estimate the selling price of the products. A cost of $425,000 was incurred in the joint process. Product X's production was 80% of product Y's while product Z's production was 125% of product Y's. What is the amount of the joint cost allocable to product X assuming Raymer uses the physical quantities method of allocation? A. $111,475. B. $114,865. C. $139,344. D. $141,667.

A. $111,475.

Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred: The following information is available concerning various activity measures and service usages by each of the divisions: If common computer service costs are allocated using computer time as the allocation basis, what is the computer cost allocated to Division B? A. $136,190. B. $137,647. C. $144,444. D. $173,333.

A. $136,190.

Brandeis Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the direct-method of cost allocation, the amount of S1 costs allocated to P1 would be: A. $20,000. B. $6,000. C. $30,000. D. $62,500.

A. $20,000.

Anchorage Company manufactures three main products, L, M, and N, from a joint process. Additional information for June production activity follows: Assuming that the 10,000 units of N were processed further and sold for $78,000, what was Anchorage's gross profit from this sale? Assume the physical quantities method of allocation is used. A. $21,000. B. $28,500. C. $30,000. D. $66,000.

A. $21,000.

The Emery Construction Company occupies 85,000 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Emery is as follows: Rent paid for the area used is $720,000. How much rent is allocable to the assembly department using the direct method of allocation? A. $420,000. B. $332,500. C. $300,000. D. $252,000.

A. $420,000.

Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred: The following information is available concerning various activity measures and service usages by each of the divisions: If all common costs are allocated using operating profit as the allocation basis, what is the total cost allocated to Division B? A. $457,286. B. $512,714. C. $555,000. D. $1,087,576.

A. $457,286.

Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. Information concerning this process for a recent month appears below: If Chocolate Delight is processed further, the gross profit margin that will appear in a product line income statement for Chocolate Delight would be: A. $734,286. B. $520,000. C. $1,020,000. D. $632,596.

A. $734,286.

Brandeis Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the step-method of cost allocation, the amount of costs allocated from S2 to P2 would be: A. $88,750. B. $50,000. C. $62,500. D. $53,250.

A. $88,750.

Which of the following departments is not a service department in a typical manufacturing company? A. Assembly. B. Accounting. C. Human resources. D. Information processing.

A. Assembly.

Which of the following methods provides no data for service departments to monitor each other's costs? A. Direct method. B. Reciprocal method. C. Step method. D. All three methods, Direct, Reciprocal, and Step, provide data for monitoring costs.

A. Direct method.

Which of the following best describes the objective of joint cost allocation? A. Inventory valuation. B. Pricing goods for sale. C. Making decisions about levels of production. D. Making decisions about raw materials requirements.

A. Inventory valuation.

Which of the following statements is (are) false regarding the direct method of allocating service department costs? (A) The selection of an allocation base in the direct method is easier than the selection of an allocation base in the step method. (B) Once an allocation is made from a service department using the direct method, no further allocations are made back to that department. A. Only A is false. B. Only B is false. C. Neither A nor B is false. D. Both A and B are false.

A. Only A is false.

Computer Complex, Inc. has two main services: (1) time on a timeshared computer system, and (2) proprietary computer programs. Computer time is provided by the operation department (Op) and programs are written by the programming department (P) The percentage of each service used by each department for a typical period is: In a typical period, the operation department (Op) spends $4,500 and the programming department (P) spends $2,500. Under the reciprocal method what is the algebraic solution to the cost allocation problem? A. Op = 4,500 + .40 P; P = 2,500 + .30 Op. B. Op = 4,500 + .70 P; P = 2,500 + .60 Op. C. Op = 2,500 + .40 P; P = 4,500 + .30 Op. D. Op = 2,500 + .70 P; P = 4,500 + .60 Op.

A. Op = 4,500 + .40 P; P = 2,500 + .30 Op.

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department P3 (marketing) is: A. P3 = $285,000 + .20S1 + .20S3. B. P3 = $285,000 + .20S1 + .60S2 + .20S3. C. P3 = $285,000 + .20S1 + .20S2 + .60S3. D. P3 = $285,000 + .50S1 + .50S3.

A. P3 = $285,000 + .20S1 + .20S3.

If two service departments service the same number of departments, which service department's costs should be allocated first when using the step method? A. The service department that provides the most service to other service departments. B. The service department that provides the most service to the user departments. C. The service department with the least cost. D. The service department that provides the least service to other service departments. E. The service department that provides the least service to the user departments.

A. The service department that provides the most service to other service departments.

Product C is one of several joint products that come out of Department M. The joint costs incurred in Department M total $40,000. Product C can be sold at split-off or processed further and sold as a higher quality item. The decision to process further should be based on the: A. assumption that the $40,000 is irrelevant. B. allocation of the $40,000, using the net realizable value. C. allocation of the $40,000, using a physical measures approach. D. allocation of the $40,000, using the relative sales value at split-off method.

A. assumption that the $40,000 is irrelevant.

A management purpose for allocating joint costs of a processing center to the various products produced is to: A. establish inventory values for unsold units. B. record accurate cost of sales by-product line. C. compute total processing cost variances by-product. D. report correct standard product costs for comparative analysis.

A. establish inventory values for unsold units.

For purposes of allocating joint costs to joint products, the estimated net realizable value at split-off is equal to: A. final sales price reduced by cost to complete after split-off. B. sales price less a normal profit margin at the point of sale. C. separable product cost plus a normal profit margin. D. total sales value less joint costs at point of split-off.

A. final sales price reduced by cost to complete after split-off.

The following information relates to Ray Corporation for the past accounting period. Using the simultaneous solution method, Department B's cost allocated to Department C is A. $29,021 B. $14,021 C. $13,192 D. $7,794

B. $14,021

The characteristic that is most often used to distinguish a product as either a main product or a by-product is the amount of: A. sales value of the products produced during the common production process. B. direct manufacturing costs (e.g., materials) incurred before the split-off point. C. physical measures in the products produced during the common production process. D. time (i.e., labor) required to produce the products from start to finish.

A. sales value of the products produced during the common production process.

In joint product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits? (CMA adapted) A. separable costs after the split-off point. B. joint costs to the spilt-off point. C. sales salaries for the period when the units were produced. D. purchase costs of the materials required for the joint products. E. the company president's salary.

A. separable costs after the split-off point.

Brandeis Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the step-method of allocation, the total amount of service costs allocated to producing departments would be: A. $118,000. B. $160,000. C. $140,000. D. $40,000.

B. $160,000.

Castle Company has two service departments and two user departments. The number of employees in each department is: The fixed costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $37,125 during a given period, the amount of cost allocated to the Cafeteria under the step method would be: A. $0. B. $1,718.75. C. $1,687.50. D. $1,802.18.

B. $1,718.75.

Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical: Variable cost: expected number of work orders processed Fixed cost: long-run average number of work orders processed Janitorial: Variable cost: labor hours Fixed cost: square footage of space occupied Average and expected activity levels for next month (June) are as follows: Expected costs in the service departments for June are as follows: Under the step method of allocation, how much Clerical service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar.) A. $12,689. B. $13,100. C. $13,620. D. $15,596. E. $16,070.

B. $13,100.

The Emery Construction Company occupies 85,000 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Emery is as follows: Rent paid for the area used is $720,000. How much rent would be charged to S4 using the step method of allocation and a S3-S4-S1-S2 sequence for the allocations? A. $36,000. B. $40,000. C. $54,000. D. $90,000.

B. $40,000.

The Moody Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were: Assume Q is a by-product and Moody uses the cost reduction method of accounting for by-product cost. If estimated net realizable value is used, how much of the joint costs would be allocated to product R? A. $38,889. B. $43,750. C. $50,000. D. $62,500.

B. $43,750.

The Moody Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were: What is the net income of Moody Company if the estimated net realizable value method of joint cost allocation is used? A. $20,000. B. $50,000. C. $150,000. D. $350,000.

B. $50,000.

Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred: The following information is available concerning various activity measures and service usages by each of the divisions: Using the most appropriate allocation basis, what is the personnel cost allocated to Division A? A. $58,143. B. $74,643. C. $76,463. D. $110,000.

B. $74,643.

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. What is the cost of the Accounting Department's cost allocated to Department A using the step method and assuming the Maintenance Department's costs are allocated first? A. $81,333. B. $81,587. C. $80,000. D. $68,571.

B. $81,587.

Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. Information concerning this process for a recent month appears below: Based on the information presented, which of the products should be processed further? A. Sweet Meats only. B. Both Sweet Meets and Chocolate Delight. C. Minty Wonders only. D. Both Sweet Meats and Minty Wonders.

B. Both Sweet Meets and Chocolate Delight.

Computer Complex, Inc. has two main services: (1) time on a timeshared computer system, and (2) proprietary computer programs. Computer time is provided by the operation department (Op) and programs are written by the programming department (P) The percentage of each service used by each department for a typical period is: In a typical period, the operation department (Op) spends $4,500 and the programming department (P) spends $2,500. Under the step method (Op first), what is the cost of the computer time and the computer programs for sale? A. Option a B. Option b C. Option c D. Option d E. Option e

B. Option b 3,150, 3,850

Net realizable value at the split-off point is used to allocate: A. Option a B. Option b C. Option c D. Option d

B. Option b no, yes

LaCrescent University has 20 departments. Two of its best departments are the (1) College of UBW (Underwater Basket Weaving) and (2) Testing Services. The College of UBW attempts to teach students the difficult, but useful, skill of weaving baskets underwater. Testing Services grades examinations for professors. How would these two departments be classified? A. Option a B. Option b C. Option c D. Option d

B. Option b user, service

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department P1 (subassemblies) is: A. P1 = $550,000 + .25P2 + .20P3 + .15S2 + 10S3. B. P1 = $550,000 + .30S1 + .50S2 + .20S3. C. P1 = .30S1 + .50S2 + 20S3. D. P1 = .30S1 + .50S.

B. P1 = $550,000 + .30S1 + .50S2 + .20S3.

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department S3 (supervision) is: A. S3 = $45,000 + .90S1 + .10S2. B. S3 = $45,000 + .10S1. C. S3 = $45,000 + 1.00S1. D. S3 = .10S1.

B. S3 = $45,000 + .10S1.

Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. Information concerning this process for a recent month appears below: The joint processing costs in this operation: A. should be allocated to products to determine whether they are sold at split-off or processed further. B. should be ignored in determining whether to sell at split-off or process further. C. should be ignored in making all product decisions. D. are never included in product cost, as they are misleading to all management decisions.

B. should be ignored in determining whether to sell at split-off or process further.

Brandeis Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the direct-method of cost allocation, the amount of S1 costs allocated to the S2 would be: A. $42,000. B. $20,000. C. $0. D. $6,000.

C. $0.

Brandeis Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the step-method of cost allocation, the amount of S2 costs allocated to S1 would be: A. $40,000. B. $20,000. C. $0. D. $42,000.

C. $0.

Lankip Company produces two main products and a by-product out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Lankip has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month are presented in the chart below. During the month, Lankip incurred joint production costs of $2,520,000. The main products are not marketable at the split-off point and, thus, have to be processed further. The amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical quantities method to allocate joint production costs would be: A. $1,200,000. B. $1,260,000. C. $1,500,000. D. $1,575,000.

C. $1,500,000.

Vreeland, Inc., manufactures products X, Y, and Z from a common process. Joint costs were $60,000. Additional information is as follows: Assuming that joint product costs are allocated using the net realizable value method, what were the total costs assigned to Product Y? A. $26,000. B. $26,796. C. $27,000. D. $28,286.

C. $27,000.

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. What is the Maintenance Department's cost allocated to Department A using the direct method? A. $92,000. B. $230,000. C. $276,000. D. $386,400.

C. $276,000.

Products X, Y, and Z are produced from the same process at a cost of $5,200. Five thousand pounds of raw material yields 1,500 X, 2,500 Y, and 1,000 Z. Selling prices are: X $2 per unit, Y $4 per unit, Z valueless. The ending inventory of X is 50 units. What is the value of the ending inventory if joint costs are allocated using net realizable value? A. $21.67. B. $31.20. C. $40.00. D. $42.00.

C. $40.00.

The Moody Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were: If the estimated net realizable value method is used and product Q is accounted for as a main product, how much of the joint costs would be allocated to product R? A. $38,889. B. $41,667. C. $50,000. D. $62,500.

C. $50,000.

The Moody Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were: If joint costs are allocated based on relative weight of the outputs and all products are main products, how much of the joint costs would be allocated to product P? A. $43,750. B. $50,000. C. $60,000. D. $62,500.

C. $60,000.

The following information relates to Ray Corporation for the past accounting period. Using the simultaneous solution method, Department A's cost allocated to Department C is: A. $48,000. B. $58,800. C. $60,619. D. $98,000.

C. $60,619.

Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical: Variable cost: expected number of work orders processed Fixed cost: long-run average number of work orders processed Janitorial: Variable cost: labor hours Fixed cost: square footage of space occupied Average and expected activity levels for next month (June) are as follows: Expected costs in the service departments for June are as follows: Under the direct method of allocation, what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.) A. $6,231. B. $7,720. C. $8,640. D. $9,330. E. $9,804.

C. $8,640.

Which of the following is not a step needed to maximize the profits from joint products? A. Forecasting the sales price of each final product. B. Identifying alternative sets and quantities of final products possible from the joint process. C. Determining how to allocate joint costs to the final products. D. Estimating the costs required to further process joint products into salable products.

C. Determining how to allocate joint costs to the final products.

Which of the following is not a physical measure that can be used for allocating joint costs using the physical quantities method? A. Tons of steel. B. Ounces of gold. C. Dollars of labor. D. Feet of lumber.

C. Dollars of labor.

Whitney Smith Company makes two products: X and Y. They are initially processed from the same raw material and then, after split-off, further processed separately. Additional information is as follows: What are the joint costs allocated to products X and Y assuming Whitney Smith uses the net-realizablevalue approach? A. Item A. B. Item B. C. Item C. D. Item D.

C. Item C. 8,800, 4,400

Which of the following would be an appropriate cost-allocation base for allocating the cost of the company cafeteria? A. Square footage occupied by departments. B. Number of hours of use. C. Number of meals served. D. Salaries of personnel purchasing meals.

C. Number of meals served.

Great Falls Company makes two products, G and H. They are initially processed from the same raw material and then, after split-off, further processed separately. Additional information is as follows: What are the joint costs allocated to products G and H assuming Great Falls uses the estimated net realizable value approach? A. Option a B. Option b C. Option c D. Option d

C. Option c 4,400, 2,200

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department S1 (building occupancy) is: A. S1 = .10S3. B. S1 = $85,000 + 1.00S3. C. S1 = $85,000 + .10S3. D. S1 = $85,000 + .90S2 + .10S3.

C. S1 = $85,000 + .10S3.

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department S2 (research and development) is: A. S2 = $120,000 + .15S1 + .65S2 + .20S3. B. S2 = .15S1 + 20S3. C. S2 = $120,000 + .15S1 + .20S3. D. S2 = $120,000 + .40S1 + .60S3.

C. S2 = $120,000 + .15S1 + .20S3.

Which of the following is not a reason to justify the allocation of support services? A. Tax reporting requirements. B. Influencing behavior of employees. C. To trace costs to the activity that created the costs. D. Cost based contracts.

C. To trace costs to the activity that created the costs.

Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. Information concerning this process for a recent month appears below: The net advantage (disadvantage) of processing Sweet Meats further is: A. a $25,000 disadvantage to process further. B. a $32,143 advantage to process further. C. a $25,000 advantage to process further. D. a $282,143 disadvantage to process further.

C. a $25,000 advantage to process further.

Products with a relatively minor sales value are called: A. scrap. B. spoilage. C. by-products. D. main products.

C. by-products.

Allocation of factory service department costs to the production departments is necessary to: A. measure use of plant capacity. B. make sure that machines are operating efficiently. C. calculate cost per unit for purposes of external financial reporting. D. control costs.

C. calculate cost per unit for purposes of external financial reporting.

Service department costs are: A. generally treated as period costs rather than product costs. B. reported as selling and administrative expenses on the income statement. C. eventually applied by the user departments to the units produced. D. seldom found in manufacturing organizations.

C. eventually applied by the user departments to the units produced.

Joint products and byproducts are produced simultaneously by a single process or series of processes and: A. joint products are salable at the split-off point, but byproducts are not. B. by-products are salable at the split-off point, but joint products are not. C. the revenue from by-products may be recognized at the time of production. D. all by-products must be allocated some portion of joint costs.

C. the revenue from by-products may be recognized at the time of production.

Lite Co. manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as follows: Joint costs were allocated using the net realizable value method at the split-off point. The joint costs allocated to product X were A. $75,000. B. $100,800. C. $150,000. D. $168,000.

D. $168,000.

Castle Company has two service departments and two producing departments. The number of employees in each department is: The department costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $37,125 during a given period, the amount of cost allocated to Department B under the direct method would be: A. $0. B. $17,187.50. C. $16,875.00. D. $18,021.84.

D. $18,021.84.

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively. What is the Maintenance Department's cost allocated to Department B using the step method and assuming the Maintenance Department's costs are allocated first? A. $276,000. B. $230,000. C. $322,000. D. $23,810.

D. $23,810.

Vreeland, Inc., manufactures products X, Y, and Z from a common process. Joint costs were $60,000. Additional information is as follows: Assuming that joint production costs are allocated using the physical quantities method (units produced), what were the costs allocated to Product X? A. $27,000. B. $29,000. C. $33,000. D. $30,000.

D. $30,000.

Which of the following is not a benefit of cost allocation? A. Instilling responsibility for all costs of the company in division managers. B. Constructing performance measures that may be more meaningful than contribution margins. C. Relating indirect costs to contracts, jobs and products. D. Additional bookkeeping costs incurred to provide cost allocation information.

D. Additional bookkeeping costs incurred to provide cost allocation information.

Which of the following statements is false regarding the use of multiple cost pools? A. Using more pools generally results in better cost allocations. B. Designing and maintaining a system with multiple pools can be complex and costly. C. The use of Activity-Based-Accounting will almost always require multiple cost pools. D. All support service costs are generally allocated using a single cost pool.

D. All support service costs are generally allocated using a single cost pool.

Which of the following service departments could logically use space occupied (square footage) to allocate its costs to user departments? A. Material Handling. B. Cafeteria. C. Custodial Services. D. Cost Accounting. E. Engineering.

D. Cost Accounting.

Zebra Manufacturing Company incurred a joint cost of $600,000 in the production of R and S in a joint process. Presently, 1,800 of R and 1,400 of S are being produced each month. Management plans to decrease R's production by 300 units in order to increase the production of S by 500 units. Additionally, this change will require minor modifications, which will add $20,000 to the joint cost. This cost is entirely attributable to product S. What is the amount of the joint costs allocable to R and S before changes to existing production assuming Zebra allocates their joint costs according to the proportion of S and R produced? A. Option a B. Option b C. Option c D. Option d

D. Option d 337,500, 262,500

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Reality Company. Use of services by other departments is as follows. The equation for department P2 (final assembly) is: A. P2 = .25S1 + .50S2 + .30S3. B. P2 = $775,000 + .25P2 + .20P3 + .15S2 + .10S3. C. P2 = $775,000 + .30S1 + .50S2 + .20S3. D. P2 = $775,000 + .25S1 + .50S2 + .30S3.

D. P2 = $775,000 + .25S1 + .50S2 + .30S3.

Which of the following is a weakness of the step method of service cost allocations? A. Computations are more complex than the reciprocal method. B. All interdepartmental services are ignored. C. All intradepartmental services are ignored. D. The order of service department allocation has to be determined.

D. The order of service department allocation has to be determined.

Which of the following is the least practical reason for allocating service department costs to user departments? A. To ascertain profitability of user departments. B. To evaluate performance of managers and divisions. C. To make user departments aware that services are costly. D. To provide the best possible service to users.

D. To provide the best possible service to users.

Because this allocation method recognizes that service departments often provide each other with interdepartmental service, it is theoretically considered to be the most accurate method for allocating service department costs to production departments. This method is: (CMA adapted) A. direct method. B. variable method. C. linear method. D. reciprocal method. E. step-down method.

D. reciprocal method.

For the purposes of allocating joint costs to joint products, the sales price at the point of sale, reduced by the cost to complete after split-off, is assumed to be equal to the: (CPA adapted) A. total costs. B. joint costs. C. sales price less a normal profit margin at point of sale. D. relative sales value at split-off.

D. relative sales value at split-off.

Criteria for selecting allocation bases for service department allocations should not include: A. direct, traceable benefits from the service. B. the extent of facilities provided. C. the ease of making an allocation. D. sales dollars generated during the period.

D. sales dollars generated during the period.

If by-product revenue is treated as other revenue instead of deducted from the net-realizable-value of the main products: A. overall gross margin of the company will be higher. B. overall gross margin of the company will be lower. C. the answer would depend on how joint product costs were allocated. D. there is no difference in the overall gross margin of the company.

D. there is no difference in the overall gross margin of the company.

The Freed Company produces three products, X, Y, and Z from a single raw material input. Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000. Product Y: A. should be sold at the split-off point, rather than processed further. B. would increase the company's overall net income by $18,000 if processed further and then sold. C. would increase the company's overall net income by $68,000 if processed further and then sold. D. would increase the company's overall net income by $2,000 if processed further and then sold.

D. would increase the company's overall net income by $2,000 if processed further and then sold.

Which of the following statements regarding accounting for by-products is true? A If all products are sold in the same period as they are produced, treating by-product revenue as other . revenue will result in a higher overall gross margin. BIf all products are sold in the same period as they are produced, treating by-product net-realizable-value . as a deduction of the cost of the main products will result in a higher overall gross margin. C If all products are sold in the same period as they are produced, total reported revenues will be the same . regardless of how by-product revenue is accounted for. DIf all products are sold in the same period as they are produced, the reported gross margin will be the . same regardless of how by-product revenue is accounted for.

DIf all products are sold in the same period as they are produced, the reported gross margin will be the . same regardless of how by-product revenue is accounted for.

Which of the following statements about maximizing the profit of joint product processes is true? A. Joint processing costs incurred prior to split-off should be allocated before making those decisions. B. Only costs caused by management decisions to choose one or another set of products after split-off are relevant. C.Only revenues from selling or processing beyond the split-off point and additional expenditures for further processing are relevant. DOnly costs caused by management decisions to choose one or another set of products after split-off . are relevant AND only revenues from selling or processing beyond the split-off point and additional expenditures for further processing are relevant.

DOnly costs caused by management decisions to choose one or another set of products after split-off . are relevant AND only revenues from selling or processing beyond the split-off point and additional expenditures for further processing are relevant.

Which of the following cost items is not allocable as joint costs when a single manufacturing process produces several main products and several by-products? A. Direct materials. B. Variable overhead. C. Direct labor. D. Fixed overhead. E. Freight-out.

E. Freight-out.

Allocated joint costs are useful for: A. setting the selling price of a product. B. determining whether to continue producing an item. C. controlling user department costs. D. evaluating management by means of a responsibility reporting system. E. determining inventory cost for accounting purposes.

E. determining inventory cost for accounting purposes.

There are several methods for allocating service department costs to production departments. The method which recognizes service provided by one service department to another but does not recognize reciprocal interdepartmental service is called: (CMA adapted) A. direct method. B. variable method. C. linear method. D. reciprocal method. E. step-down method.

E. step-down method.