Ch 11 Cost Accounting

Bagely company has two service departments and two producing departments. Square footage of space occupied by each department follows: Custodial 1000ft Gen Admin 3000ft Dept A 8000ft Dept B 8000ft The department costs of custodial services are allocated on a basis of square footage of space. If custodial services are budgeted at $38,000, the amount of cost allocated to Gen Admin under the direct method would be

$0

The number of employees in each department is Personel 10, Cafeteria 25, Dept A 265 and Dept B 250, Total 550. If the departments costs of Personnel are allocated on the basis of the number of employees and budgeted costs are $37125. What is the cost allocated to the Cafeteria under the step method?

25/25+265+250 x 37125 = 1718.75

The number of employees in each department is Personel 10, Cafeteria 25, Dept A 265 and Dept B 250, Total 550. If the departments costs of Personnel are allocated on the basis of the number of employees and budgeted costs are $37125. What is the cost allocated to Dept B using the direct method?

250/265+250 x 37125 = 18021.84

Product C is one of the 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

Assumption that the $40,000 is irrelevant.

Which of the following service departments could logically use space occupied to allocate its costs to user departments?

Custodial services.

Joint costs are processing costs incurred after the split off point in a common production process.

False. Joint costs are those that occur prior to reaching the split off point.

One advantage of the step method is that all reciprocal services are recognized between service departments.

False. Once the costs of a service is allocated it is considered closed.

One potential disadvantage of the reciprocal method is it could overstate the cost of running the organizations service departments.

False. The reciprocal method is the most accurate.

In deciding whether to outsource a service department or not, the cost of the service department should be estimated using the step method of allocation.

False. The reciprocal method should be used because it is the most accurate.

Net realizable value at the split off point is used to allocate

Incurred joint costs only.

Which of the following best describes the objective of joint cost allocation?

Inventory valuation Joint cost allocations generally do not provide good decision making support. It is used primarily to account for cost allocation between inventory and cost of goods sold.

If two service departments service the same number of departments, which service department's costs should be allocated first when using the step method?

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

One reason to allocate service dept costs to user departments is to encourage the user departments to monitor their use of the service departments.

True.

The step method allocates some, but not all, service department costs to other service departments.

True.

The direct method makes no cost allocations between or among service departments.

True. All costs are directly allocated to the producing departments, as if service departments were not a user of the services themselves.

The estimated net realizable value at the split off point is calculated by taking the sales value after further processing and deducting the additional process costs.

True.`

Which of the following methods provides no data for service departments to monitor each others costs?

The direct method.