34.
Jamison Company has two service departments and two producing departments. Square
footage of space occupied by each department follows:
Custodial services
1,000 ft
General administration
3,000 ft
Producing department A
8,000 ft
Producing department B
8,000 ft
20,000 ft
35.
Veneer Company has two service departments and two producing departments. The
number of employees in each department is:
10
25
265
250
550
36.
Which of the following is not a benefit of cost allocation?
11–24
37.
Tenet Engineering, 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:
Computer services (85% fixed)
$260,000
Building occupancy
600,000
Personnel costs
110,000
Total common costs
$970,000
The following information is available concerning various activity measures and service
usages by each of the divisions:
Division
A
Division
B
Area occupied (square
feet)
20,000
40,000
Payroll
$380,000
$180,000
Computer time (hours)
200
220
Computer storage
(megabytes)
4,050
-0-
Equipment value
$200,000
$250,000
Operating profit (pre-
allocations)
$555,000
$495,000
If common computer service costs are allocated using computer time as the allocation
basis, what is the computer cost allocated to Division B?
11–25
38.
Tenet Engineering, 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:
Computer services (85% fixed)
$260,000
Building occupancy
600,000
Personnel costs
110,000
Total common costs
$970,000
The following information is available concerning various activity measures and service
usages by each of the divisions:
Division
A
Division
B
Area occupied (square
feet)
20,000
40,000
Payroll
$380,000
$180,000
Computer time (hours)
200
220
Computer storage
(megabytes)
4,050
-0-
Equipment value
$200,000
$250,000
Operating profit (pre-
allocations)
$555,000
$495,000
$58,143.
$74,643.
11–27
39.
Tenet Engineering, 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:
Computer services (85% fixed)
$260,000
Building occupancy
600,000
Personnel costs
110,000
Total common costs
$970,000
The following information is available concerning various activity measures and service
usages by each of the divisions:
Division
A
Division
B
Area occupied (square
feet)
20,000
40,000
Payroll
$380,000
$180,000
Computer time (hours)
200
220
Computer storage
(megabytes)
4,050
-0-
Equipment value
$200,000
$250,000
Operating profit (pre-
allocations)
$555,000
$495,000
40.
Which of the following methods provides no data for service departments to monitor each
other’s costs?
41.
The Maryville 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 Maryville is as
follows:
Dept
Area
used
S1
S2
S3
S4
Allocation
Finishing
Assembly
S1
17,000
—
.10
.20
—
.20
.50
S2
4,250
—
—
.30
.30
—
.40
S3
8,500
.20
.20
—
.30
.20
.10
S4
4,250
.30
.10
.30
—
.20
.10
Fin.
21,250
—
—
—
—
—
—
Asm.
29,750
—
—
—
—
—
—
42.
The Maryville 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 Maryville is as
follows:
Dept
Area
used
S1
S2
S3
S4
Allocation
Finishing
Assembly
S1
17,000
—
.10
.20
—
.20
.50
S2
4,250
—
—
.30
.30
—
.40
S3
8,500
.20
.20
—
.30
.20
.10
S4
4,250
.30
.10
.30
—
.20
.10
Fin.
21,250
—
—
—
—
—
—
Asm.
29,750
—
—
—
—
—
—
43.
If two service departments service the same number of departments, which service
department’s costs should be allocated first when using the step method?
44.
Which of the following is a weakness of the step method of service cost allocations?
45.
The Hsu 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.
Maint
Acctg
A
B
Machine hours
480
20
2,300
200
Number of employees
2
2
8
4
What is the Maintenance Department’s cost allocated to Department A using the direct
method?
46.
The Hsu 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.
Maint
Acctg
A
B
Machine hours
480
20
2,300
200
Number of employees
2
2
8
4
What is the Accounting Department’s cost allocated to Department B using the direct
method?
47.
The Hsu 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.
Maint
Acctg
A
B
Machine hours
480
20
2,300
200
Number of employees
2
2
8
4
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?
48.
The Hsu 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.
Maint
Acctg
A
B
Machine hours
480
20
2,300
200
Number of employees
2
2
8
4
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?
11–37
49.
Steven Parker owns and operates Steven’s Septic Service and Legal Advice. Steven’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:
No. of
Work
Orders
Expected
Average
Labor
Hours
Square
Footage
Septic
Service
50
80
560
1,800
Legal
advice
25
20
840
2,200
Clerical
20
20
400
1,600
Janitorial
5
20
200
1,000
Expected costs in the service departments for June are as follows:
Clerical
Janitorial
Variable costs
$12,000
$4,200
Fixed costs
$8,400
$800
Under the step method of allocation, how much Clerical service cost should be allocated
11–39
50.
Steven Parker owns and operates Steven’s Septic Service and Legal Advice. Steven’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:
No. of
Work
Orders
Expected
Average
Labor
Hours
Square
Footage
Septic
Service
50
80
560
1,800
Legal
advice
25
20
840
2,200
Clerical
20
20
400
1,600
Janitorial
5
20
200
1,000
Expected costs in the service departments for June are as follows:
Clerical
Janitorial
Variable costs
$12,000
$4,200
Fixed costs
$8,400
$800
Under the direct method of allocation, what is the total amount of service cost allocated to