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106.
Cost allocation of shared facilities cost is intended to remind managers of:
107.
Dual allocation is a cost allocation approach that separates direct and indirect costs,
tracing the direct costs directly to the department that:
108.
If a budgeted activity base is used as the base in cost allocation, each department's cost
allocation will be predictable, and not influenced by the:
109.
The concepts of cost allocation that are used in manufacturing can also apply in:
110.
Which of the following is not one of the objectives of cost allocation?
111.
Examples of pressures that can lead to financial fraud do not include:
112.
Which one of the following firms is likely to experience dysfunctional motivation on the
part of its managers due to its allocation methods? (CMA adapted)
113.
The Sarbanes-Oxley Act of 2002 requires that management of publicly traded companies:
114.
Which of the following is not an internal control?
12-87
115.
Internal controls include all of the following except:
Essay Questions
12-88
116.
Maryland Hotels operates a centralized call center for the reservation needs of its time-
share units. Costs associated with use of the center are charged to the time-share group
(Luxury, Resort, Standard, and Budget) where a reservation is made on the basis of time
on a call. Idle time of the reservation agents, time spent on calls where no reservation is
made, and the fixed cost of the equipment are allocated on the number of reservations
made in each group. Due to recent increased competition in the time-share business, the
company has decided that it is necessary to more accurately allocate its costs to price its
services competitively and profitably. During the current period, the use of the call center
for each group was as follows (in thousands of seconds for time usage and in number of
reservations):
Division
Time Usage
Number of Reservations
Luxury
750,000
50,000
Resort
1,250,000
100,000
Standard
2,000,000
300,000
Budget
1,500,000
250,000
12-91
117.
Atlantic Resorts operates a centralized call center for the reservation needs of its time-
share units. Costs associated with use of the center are charged to the time-share group
(Luxury, Standard, and Budget) where a reservation is made on the basis of time spent on
a call. Due to recent increased competition in the time-share business, the company has
decided that it is necessary to more accurately allocate its costs to price its services
competitively and profitably. During the current period, the use of the call center for each
group was as follows (in thousands of seconds for time usage and in number of
reservations):
Division
Time Usage
Number of
Reservations
Luxury
500,000
50,000
Standard
2,000,000
300,000
Budget
1,500,000
250,000
12-93
118.
Seaside Resorts operates a centralized call center for the reservation needs of its time-
share units. Costs associated with use of the center are charged to the time-share group
(Luxury and Standard) where a reservation is made on the basis of time spent on a call.
Due to recent increased competition in the time-share business, the company has decided
that it is necessary to more accurately allocate its costs to price its services competitively
and profitably. During the current period, the use of the call center for each group was as
follows (in thousands of seconds for time usage and in number of reservations):
Division
Time Usage
Number of Reservations
Luxury
500,000
50,000
Standard
2,000,000
300,000
12-95
119.
The Document Creation Center (DCC) for Atlas Corp. provides document services for three
departments in the St. Louis office. The following budget has been prepared for the
month.
Budgeted usage:
Software
Development
160,000 pages
Training
300,000 pages
Management
340,000 pages
Cost equation
$31,000 + $0.03 per
page
12-97
120.
The legal department for Trump Corporation provides legal services for four departments
in the Manhattan office. The following budget has been prepared for the month.
Budgeted usage:
Purchasing
160 contracts
Marketing
200 contracts
Training
300 contracts
Management
340 contracts
Cost equation
$167,500 + $50 per contract
12-99
121.
The Human Resources Department for Vargis Corp. provides personnel services for two
departments in the Kansas City office. The following budget has been prepared for the
month.
Budgeted:
Production
860 employees
Management
140 employees
Cost equation
$46,500 + $20 per employee
Required (use three decimal places in your calculations):
If Vargis uses a dual rate for allocating its costs based on employees, how much cost will
be allocated to the two departments?
Production: $57,190; Management: $9,310
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