exam 6 cost april 2012

Answer the following questions using the information below:

Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

Support DepartmentsProduction

DepartmentsMaintenanc

e Department

Personnel Department A B

Budgeted costs $160,000 $40,000 $80,000 $120,000

Budgeted maintenance-hours

NA 400 480 320

Number of employees 20 NA 80 2401.

Using the direct method, what amount of Maintenance Department costs will be allocated to Department A?

A)

$48,000 B)

$64,000 C)

$78,000 D)

$96,000 = 480/(480 + 320) x $160000

2.

Using the direct method, what amount of Personnel Department costs will be allocated to Department A? A)

$10,000 80 / (80 + 240) x $40,000= $10,000B)

$16,000 C)

$24,000 =480/80 x 40000

D)

$30,000

3.

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A)

$32,000 B)

$42,667 C)

$57,334 D)

$64,000

Maintenance provided to Personnel: 400 / (400 + 480 + 320) = .333Personnel provided to Maintenance: 20 / (20 + 80 + 240) = .059Maintenance provides the greatest amount of service to support departments, so it is allocated first.

Dept A: 480 / (400 + 480 + 320) x $160,000 = $64,000

Answer the following questions using the information below:

Betty's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $75,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $125,000 and $150,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:

Support DepartmentsProduction

DepartmentsWarehouse Department

Data Center Department Music Books

Budgeted costs $175,000 $75,000 $125,000

$150,000

Budgeted warehouse-hours

NA 250 500 750

Number of computer hours

100 NA 400 500

4.

Using the direct method, what amount of Warehouse Department costs will be allocated to Department Books?

A)

$70,000 B)

$105,000 C)

$75,000 D)

$87,500

5.

Using the direct method, what amount of Data Center Department costs will be allocated to Department Music?

A)

$75,000 B)

$33,333 C)

$41,667 D)

$30,000 6.

Using the step-down method, what amount of Data Center Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A)

$25,000 B)

$75,000 C)

$7,500 D)

$0

7.

Using the step-down method, what amount of Warehouse Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A)

$58,333 B)

$116,667 C)

$60,833 D)

$121,667

8.

Using the step-down method, what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A)

$58,671 B)

$33,333 C)

$46,296 D)

$41,667

Answer the following questions using the information below:

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

Budgeted manufacturing overhead costs:Plant Maintenance PM (Support Dept) $350,000Data Processing DP (Support Dept) $ 75,000Machining M (Operating Dept) $225,000Capping C (Operating Dept) $125,000

Services furnished:By Plant Maintenance (budgeted labor-hours):

to Data Processing 3,500to Machining 5,000to Capping 8,200

By Data Processing (budgeted computer time):to Plant Maintenance 600to Machining 3,500to Capping 600

9.

Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

A)

DP= $75,000 + (600/4,700) PM B)

DP= $75,000 + (3,500/16,700) PM C)

DP= $75,000 × (600/4,700) + $350,000 × (3,340/16,700) D)

DP= $350,000 + (600/16,700) DP 10.

What is the complete reciprocated cost of the Plant Maintenance Department? A)

$393,750 B)

$369,459 C)

$365,000 D)

$375,773

11.

What is the complete reciprocated cost of the Data Processing Department? A)

$90,000 B)

$118,750 C)

$122,971 D)

$152,432 Answer the following questions using the information below:

Joanne, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis:

Budgeted manufacturing overhead costs:Maintenance M (Support Dept) $150,000Personnel P (Support Dept) $ 80,000Weaving W (Weaving Dept) $325,000Colorizing C (Colorizing Dept) $175,000

Services furnished:By Maintenance (budgeted labor-hours):

to Personnel 500to Weaving 3,500to Colorizing 2,000

By Personnel (Number of employees serviced):Plant Maintenance 5Weaving 15Colorizing 10

12.

Which of the following linear equations represents the complete reciprocated cost of the Personnel Department?

A)

P= $150,000 - $80,000 (500/6,000) M B)

P= (500/6,000) M C)

P= $80,000 + (500/6,000) M D)

P= $80,000

13.

What is the complete reciprocated cost of the Maintenance Department? A)

$165,634 B)

$163,333 C)

$150,000 D)

$0

14.

What is the complete reciprocated cost of the Personnel Department? A)

$92,500 B)

$93,803 C)

$80,000 D)

$105,000

15.

Which of the following departments is not an operating (or value added) department? A)

Machining B)

Accounting C)

Assembly D)

Finishing

16.

Which of the following is NOT one of the three methods of allocating support department costs to operating departments?

A)

direct method B)

incremental method C)

step-down method D)

reciprocal method

17.

The cost-allocation method that allocates support department costs only to production departments is the:

A)

direct method B)

sequential method C)

step-down method D)

reciprocal method

18.

A cost of operating a facility, department, activity area, or like cost object that is shared by two or more users is called a:

A)

direct cost B)

joint cost C)

fixed cost D)

common cost

19.

Under the stand-alone method of allocating common costs: A)

a ranking is used to allocate costs among the users B)

disputes can arise over who is the primary user C)

each party bears a proportionate share of the total costs in relation to their individual stand-alone costs

D)

an incentive is created to be the first-ranked user

20.

Under the incremental method of allocating common costs: A)

the parties are interested in being viewed as primary users B)

each party bears a proportionate share of the total costs in relation to their individual stand-alone costs C)

fairness and equity are emphasized D)

there is a disincentive to be titled the primary user

Answer the following questions using the information below:

The Sturgeon Bay Corporation currently uses a manufacturing facility costing $400,000 per year; 80% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%.

21.

If the stand-alone method were used, what amount of cost would be allocated to the start-up business? A)

$20,000 B)

$100,000 C)

$80,000 D)

$84,000

22.

If the incremental method were used, what amount of cost would be allocated to the start-up business? A)

$20,000 B)

$100,000 C)

$80,000 D)

$84,000

Answer the following questions using the information below:

The Egg Harbor Corporation currently leases a corporate suite in an office building for a cost of $90,000 a year. Only 70% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 30% of the suite and increase the overall costs of maintaining the space by $10,000.

23.

If the stand-alone method were used, what amount of cost would be allocated to the start-up business? A)

$10,000 B)

$27,000 C)

$30,000 D)

$37,000

24.

If the incremental method were used, what amount of cost would be allocated to the start-up business? A)

$10,000 B)

$27,000 C)

$30,000 D)

$37,000

25.

All contracts with U.S. government agencies must comply with cost accounting standards issued by the: A)

FASB B)

SEC C)

IRS D)

CASB