64. Data pertaining to a company’s joint production for the current period follows:
A B
Quantities produced…………………. 200 lbs. 100 lbs.
Processing cost after
products are separated…………….. $1,100 $400
Market value at point
of separation………………………. $8/lb. $16/lb.
Compute the cost to be allocated to Product A for this period’s $660 of joint costs if the value
basis is used.
A. $330.00.
B. $440.00.
C. $220.00.
D. $194.12.
E. $484.00.
24–22
65. A sawmill bought a shipment of logs for $40,000. When cut, the logs produced a million
board feet of lumber in the following grades. Compute the cost to be allocated to Type 1 and
Type 2 lumber, respectively, if the value basis is used.
Type 1 – 400,000 bd. ft. priced to sell at $0.12 per bd. ft.
Type 2 – 400,000 bd. ft. priced to sell at $0.06 per bd. ft.
Type 3 – 200,000 bd. ft. priced to sell at $0.04 per bd. ft.
A. $16,000; $16,000.
B. $13,333; $4,444.
C. $40,000; $24,000.
D. $24,000; $12,000.
E. $24,000; $8,000.
66. A sawmill paid $70,000 for logs that produced 200,000 board feet of lumber in 3 different
grades and amounts as follows:
Grade Production Market Price
Structural………… 25,000 board feet $1,350/1,000 bd. ft.
No. 1 Common…. 75,000 board feet $ 750/1,000 bd. ft.
No. 2 Common…. 100,000 board feet $ 300/1,000 bd. ft.
Compute the portion of the $70,000 joint cost to be allocated to No. 2 Common.
A. $ 0.
B. $17,500.
C. $23,333.
D. $35,000.
E. $70,000.
67. A dairy allocates the cost of unprocessed milk to the production of milk, cream, butter and
cheese. For the current period, unprocessed milk was purchased for $240,000, and the
following quantities of product and sales revenues were produced.
Product Pounds Price per Pound
Milk 100,000 $0.90
Cheese 50,000 2.20
Butter 20,000 1.00
Cream 10,000 3.00
How much of the $240,000 cost should be allocated to milk?
A. $ 0.
B. $ 86,400.
C. $ 90,000.
D. $133,333.
E. $240,000.
68. Breon Beef Company uses the relative market value method of allocating joint costs in its
production of beef products. Relevant information for the current period follows:
Product Production in Pounds Market Price/lb.
Sirloin…………. 3,000 $5.00
Hamburger….. 10,000 2.00
Rib eye………. 4,000 4.75
Roast………… 6,000 3.50
The total joint cost for the current period was $43,000. How much of this cost should Breon
Beef allocate to sirloin?
A. $ 0.
B. $ 5,909.
C. $ 8,600.
D. $10,750.
E. $43,000.
69. Calculating return on total assets for an investment center is defined by the following
formula for an investment center:
A. Contribution margin/Ending assets.
B. Gross profit/Ending assets.
C. Net income/Ending assets.
D. Net income/Average invested assets.
E. Contribution margin/Average invested assets.
70. Investment center managers are usually evaluated using performance measures
A. that combine income and assets.
B. that combine income and capital.
C. based on assets only.
D. based on income only.
E. that combine assets and capital.
71. A retail store has three departments, 1, 2, and 3, and does general advertising that benefits
all departments. Advertising expense totaled $50,000 for the year, and departmental sales
were as follows. Allocate advertising expense to Department 2 based on departmental sales.
Department 1………………………….. $110,000
Department 2………………………….. 213,750
Department 3………………………….. 151,250
A. $11,000.
B. $14,000.
C. $16,667.
D. $22,500.
E. $50,000.
72. Dresden, Inc. has four departments. Information about these departments is listed below.
If allocated maintenance cost is based on floor space occupied by each, compute the amount
of maintenance cost allocated to the Cutting Department.
Maintenance Cutting Assembly Packaging
Direct costs $18,000 $30,000 $70,000 $45,000
Sq. ft. of space 500 1,000 2,000 3,000
No. of employees 2 3 16 4
A. $ 2,769.
B. $ 3,000.
C. $ 3,724.
D. $ 6,000.
E. $18,000.
24–27
73. Baker Corporation has two operating departments, Machining and Assembly, and an
office. The three categories of office expenses are allocated to the two departments using
different allocation bases. The following information is available for the current period:
Office Expenses Total Allocation Basis
Salaries……………….. $30,000 Number of employees
Depreciation………… 20,000 Cost of goods sold
Advertising………….. 40,000 Net sales
Item Machining Assembly Total
Number of employees
1,000 1,500 2,500
Net sales………………. $325,000 $475,000 $800,000
Cost of goods sold…. $ 75,000 $125,000 $200,000
The amount of the total office expenses that should be allocated to Assembly for the current
period is:
A. $ 35,750.
B. $ 45,000.
C. $ 54,250.
D. $ 90,000.
E. $600,000.
74. In a firm that manufactures clothing, the department that is responsible for actually
assembling the garments could best be described as a:
A. Service department.
B. Operating or production department.
C. Cost center.
D. Department in which all of the costs incurred are direct expenses.
E. Department in which all of the costs incurred are indirect expenses.
75. A company rents a building with a total of 100,000 square feet, which are evenly divided
between two floors. The space on the first floor is considered twice as valuable as that on the
second floor. The total monthly rent for the building is $30,000. How much of the monthly
rental expense should be allocated to a department that occupies 10,000 square feet on the
first floor?
A. $6,000.
B. $5,000.
C. $3,000.
D. $4,000.
E. $2,000.
76. A company pays $15,000 per period to rent a small building that has 10,000 square feet of
space. This cost is allocated to the company’s three departments on the basis of the amount
and value of the space occupied by each. Department One occupies 2,000 square feet of
ground-floor space, Department Two occupies 3,000 square feet of ground-floor space, and
Department Three occupies 5,000 square feet of second-floor space. If rents for comparable
floor space in the neighborhood average $2.20 per square foot for ground-floor space and
$1.10 per square foot for second-floor space and the rent is allocated based on the total value
of the space, Department One should be charged rent expense for the period of:
A. $4,400.
B. $4,000.
C. $3,000.
D. $2,200.
E. $2,000.
77. Able Company has two operating (production) departments: Assembly and Fabricating.
Assembly has 150 employees and occupies 44,000 square feet; Fabricating has 100
employees and occupies 36,000 square feet. Indirect factory expenses for the current period
are as follows:
Administration $ 80,000
Maintenance $100,000
Administration is allocated based on workers in each department; maintenance is allocated
based on square footage. The total amount of indirect factory expenses that should be
allocated to the Assembly Department for the current period is:
A. $ 48,000.
B. $ 55,000.
C. $103,000.
D. $104,000.
E. $110,000.
78. Wilson Trade School allocates administrative costs to its respective departments based on
the number of students enrolled, while maintenance and utilities are allocated per square feet
of the classrooms. Based on the information below, what is the total amount allocated to the
Automotive Department (rounded to the nearest dollar) if administrative costs for the school
were $50,000, maintenance fees were $12,000, and utilities were $6,000?
Department Students Classrooms
Electrical.…...….. 120 10,000 sq. ft.
Automotive……. 70 12,000 sq. ft.
Secretarial……… 50 8,000 sq. ft.
Plumbing………. 40 6,000 sq. ft.
A. $ 0.
B. $17,000.
C. $18,500.
D. $22,667.
E. $30,000.
79. White Company has two service departments and two operating (production) departments.
The Payroll Department services all three of the other departments in proportion to the
number of employees in each. The Maintenance Department costs are allocated to the two
operating departments in proportion to the floor space used by each. Listed below are the
operating data for the current period:
Service Depts. Production Depts.
Payroll Maintenance Milling Assembly
Direct costs…………… $20,400 $25,500 $76,500 $105,400
No. of personnel……. 15 15 45
Sq. ft. of space……… 10,000 15,000
The total cost of operating the Milling Department for the current period is:
A. $14,280.
B. $15,912.
C. $76,500.
D. $90,780.
E. $92,412.
24–33
80. Farber, Inc., has four departments. The Administrative Department costs are allocated to
the other three departments based on the number of employees in each and the Maintenance
Department costs are allocated to the Assembly and Packaging Departments based on their
occupied space. Data for these departments follows:
Operating costs …….
No. of employees …
Sq. ft. of space Admin. Maintenance Assembly
Packaging
$30,000 $15,000
2 $70,000
6
2,000 $45,000
4
3,000
24–34
The total amount of the Administrative Department’s cost that would eventually be allocated
to the Packaging Department is:
A. $ 4,800.
B. $12,000.
C. $10,000.
D. $18,000.
E. $13,000.
81. Mace Department store allocates its service department expenses to its various operating
(sales) departments. The following data is available:
Expense Basis for allocation Amount
Rent Square feet of floor space $24,000
Advertising Amount of dollar sales $30,000
Administrative Number of employees $45,000
The following information is available for its three operating (sales) departments:
Square Dollar Number of
Department Feet Sales employees
A 3,000 $280,000 6
B 3,400 $300,000 8
C 3,600 $420,000 10
What is the total expense allocated to Department B?
A. $29,375.
B. $30,462.
C. $30,500.
D. $30,775.
E. $32,160.
82. A college uses advisors who work with all students in all divisions of the college. The
most useful allocation basis for the salaries of these employees would likely be:
A. number of classes offered in each division.
B. student graduation rate.
C. square footage of each division.
D. number of students advised from each division.
E. relative salaries of division heads.
83. A firm produces and sells two products, Mica and Plax. The following information is
available relating to setup costs (a part of factory overhead):
Mica Plax
Units produced……………….. 200 16,000
Batch size (units).………….... 10 400
Number of setups…..………… 20 40
Direct labor hours per unit... 5 5
Total direct labor hours….... 1,000 80,000
Cost per setup……..…………..
$ 1,080
Total setup cost…………..….. $64,800
With traditional two-stage allocation of overhead costs, using direct labor hours as the
allocation base, the setup cost portion of overhead that is allocated to each unit of product for
Mica and Plax, respectively is:
A. $.80; $.80.
B. $3.20; $3.20.
C. $4.00; $4.00.
D. $160.00; $12,800.00.
E. $200.00; $16,000.00.
84. A firm produces and sells two products, Mica and Plax. The following information is
available relating to setup costs (a part of factory overhead):
Mica Plax
Units produced……………….. 200 16,000
Batch size (units).………….... 10 400
Number of setups…..………. 20 40
Direct labor hours per unit... 5 5
Total direct labor hours….... 1,000 80,000
Cost per setup……..………… $ 1,080
Total setup cost…………..…. $64,800
Using number of setups as the activity base, the amount of setup cost allocated to each unit of
product for Mica and Plax, respectively is:
A. $21.60; $.54.
B. $54.00; $27.00.
C. $60.00; $60.00.
D. $108.00; $2.70.
E. $200.00; $16,000.00
85. Rent and maintenance expenses would most likely be allocated based on:
A. Sales volume by department.
B. Square feet of floor space occupied.
C. Number of hours worked.
D. Number of invoices processed.
E. Number of employees in each department.
86. In the preparation of departmental income statements, the preparer completes the
following steps in the following order:
A. Identify direct expenses; allocate indirect expenses; allocate service department expenses.
B. Identify indirect expenses; allocate direct expenses; allocate service department expenses.
C. Identify service department expenses; allocate direct expenses; allocate indirect expenses.
D. Identify direct expenses, allocate service department expenses; allocate indirect expenses.
E. Allocate all expenses.
87. Jamesway Corporation has two separate divisions that operate as profit centers. The
following information is available for the most recent year:
White Division Grey Division
Sales (net)……………… $200,000 $400,000
Salary expense..…...… 28,000 48,000
Cost of goods sold…… 100,000 159,000
The White Division occupies 20,000 square feet in the plant. The Grey Division occupies
30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent
expense for the year was $50,000. Compute gross profit for the White and Grey Divisions,
respectively.
A. $72,000; $193,000.
B. $172,000; $352,000.
C. $100,000; $241,000.
D. $52,000; $163,000.
E. $72,000; $163,000.
88. Jamesway Corporation has two separate divisions that operate as profit centers. The
following information is available for the most recent year:
White Division Grey Division
Sales (net)……………… $200,000 $400,000
Salary expense..…...… 28,000 48,000
Cost of goods sold….. 100,000 159,000
The White Division occupies 20,000 square feet in the plant. The Grey Division occupies
30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent
expense for the year was $50,000. Compute departmental income for the White and Grey
Divisions, respectively.
A. $52,000; $163,000.
B. $172,000; $352,000.
C. $72,000; $163,000.
D. $72,000; $193,000.
E. $100,000; $241,000.
89. The amount by which a department’s revenues exceed its direct expenses is:
A. Net sales.
B. Gross profit.
C. Departmental profit.
D. Contribution margin.
E. Departmental contribution to overhead.
90. Departmental contribution to overhead is calculated as revenues of the department less:
A. Controllable costs.
B. Product and period costs.
C. Direct expenses.
D. Direct and indirect costs.
E. Joint costs.
91. The Footwear Department of Lee’s Department Store had sales of $188,000, cost of goods
sold of $132,500, indirect expenses of $13,250, and direct expenses of $27,500 for the current
period. The Footwear Department’s contribution to overhead as a percent of sales is:
A. 7.8%.
B. 14.9%.
C. 29.5%.
D. 66.7%.
E. 85.4%.