Cost Accounting Quiz

The approach that distributes costs within each cost pool using a uniform rate per unit is referred to as the:

• incremental cost-allocation method

• reciprocal cost-allocation method

• single-rate cost allocation method

• dual-rate cost-allocation method

Examine the following details provided by the material management department: Budgeted usage of materials-handling labor-hours is 3,500. The budgeted cost pools include Fixed costs of $164,500 and Variable costs of $126,000 (calculated as 3,500 hours × $36 per hour). The company employs the single-rate method to distribute support costs to the Machining and Assembly Departments. Given that the actual hours recorded in the Machining and Assembly department are 400 for the month, what would be the allocation rate, and what total cost would be assigned to the Machining and Assembly Department for the month’s operations? (Round final answers to the nearest dollar.)

• $83 an hour for a total of $33,200

• $36 an hour for a total of $33,200

• $36 an hour for a total of $14,400

• $726 an hour for a total of $83

The Charmatz Corporation operates a central copying facility that serves two users: the Marketing Department and the Operations Department. For the upcoming budget year, the following data is relevant: Fixed costs for operating the copying facility are $70,000 per year, and variable costs are 2 cents (0.02) per copy for a total of 400,000 to 600,000 copies. The budgeted long-run usage is as follows: Marketing Department 120,000 copies and Operations Department 480,000 copies. These budgeted figures are used to determine the allocation rates. During the year, the actual usage was 150,000 copies for the Marketing Department and 410,000 copies for the Operations Department. Using a dual-rate cost-allocation method, what is the budgeted amount of copying facility costs for the Operations Department?

• $65,600

• $64,200

• $60,850

• $59,450

What is one benefit of utilizing practical capacity for cost allocation?

• is that it allows a downward supply spiral to develop

• is that it focuses management's attention on managing unused capacity

• is that budgets are much easier to develop

• is that it results in departments bearing a lower percentage of fixed costs

The reciprocal allocation method:

• is the most widely used because of its simplicity

• requires the ranking of support departments in the order that the allocation is to proceed

• fully incorporates interdepartmental relationships into the support-department cost allocations

• allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

Which of the following accurately describes how the direct allocation method assigns costs from support departments?

• it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments

• it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

• it allocates each support-department's costs to operating departments only

• it requires managers to rank the support departments after predicting the usage of multiple support departments

Hanung Corp operates two service departments: Maintenance and Personnel. The costs for the Maintenance Department amount to $370,000 and are allocated based on budgeted maintenance-hours. The Personnel Department incurs costs of $120,000, which are allocated according to the number of employees. The operating departments, A and B, have costs of $196,000 and $294,000, respectively. Below is the data regarding budgeted maintenance-hours and the number of employees: Support Department Production Department Maintenance Department Personnel Department A B Budgeted costs $370,000 $120,000 $196,000 $294,000 Budgeted maintenance-hours NA 870 1,260 670 Number of employees 90 NA 280 680 Using the direct method, what is the amount of Personnel Department costs that will be allocated to Department B? (Please do not round any intermediary calculations.)

• $32,000

• $35,000

• $77,714

• $85,000

Which of the following methods for allocating support department costs to operating departments acknowledges the mutual services provided among all support departments?

• dual-cost allocation method

• direct method

• sequential allocation method

• single-rate cost allocation method

Harbor Corp is currently leasing a corporate suite in an office building at an annual cost of $390,000. Presently, only 85% of the suite is being utilized. A new start-up has proposed a plan to occupy the remaining 15% of the suite, which would result in an additional $23,366 in overall maintenance costs. If the incremental method is applied, what cost would be assigned to the start-up business?

• $23,366

• $413,366

• $62,005

• $78,361

Hanung Corp operates two service departments: Maintenance and Personnel. The costs for the Maintenance Department amount to $320,000 and are allocated based on budgeted maintenance-hours. The Personnel Department incurs costs of $120,000, which are allocated according to the number of employees. The operating departments A and B have costs of $176,000 and $264,000, respectively. Below are the details regarding budgeted maintenance-hours and the number of employees: Support Department Production Department Maintenance Department Personnel Department A B Budgeted costs $320,000 $120,000 $176,000 $264,000 Budgeted maintenance-hours NA 900 1,200 690 Number of employees 100 NA 240 600 To determine the amount of Maintenance Department cost that will be allocated to Department B using the step-down method, which service department should be allocated first based on the highest percentage of interdepartmental support service? (Do not round any intermediary calculations.)

• $27,527

• $79,140

• $29,677

• $51,613