111) Brownley 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.
Payroll
Maintenance
Cutting
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 Maintenance Department for the current period is:
A) $29,580. B) $22,412. C) $15,912. D) $25,500. E) $14,280.
112) Flamingos, 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:
Admin.
Maintenance
Assembly
Packaging
Operating costs
$30,000
$15,000
$70,000
$45,000
No. of employees
2
6
4
Sq. ft. of space
2,000
3,000
The total amount of the Administrative Department’s cost that would eventually be allocated to the
Packaging Department is:
A) $10,000. B) $12,000. C) $18,000. D) $4,800. E) $13,000.
113) Pepper Department store allocates its service department expenses to its various operating (sales)
departments. The following data is available for its service departments:
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:
Department Square
Feet
Dollar Sales Number of
employees
A
3,000
$ 280,000
6
B
3,400
$ 300,000
8
C
3,600
$ 420,000
10
Totals
10,000
$ 1,000,000
24
What is the total expense allocated to Department B?
A) $30,462. B) $30,775. C) $30,500. D) $29,375. E) $32,160.
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114) Pepper Department store allocates its service department expenses to its various operating (sales)
departments. The following data is available for its service departments:
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
Answer: D
Explanation:
The following information is available for its three operating (sales) departments:
Department Square
Feet
Dollar Sales Number of
employees
A
3,000
$ 280,000
6
B
3,400
$ 300,000
8
C
3,600
$ 420,000
10
Totals
10,000
$ 1,000,000
24
What is the total advertising expense allocated to Department B?
A) $12,500.
B) $10,800.
C) $30,000. D) $ 9,000.
E) $7,500.
88
115) Super Grocery store allocates its service department expenses to its various operating (sales)
departments. The following data is available for its service departments:
Expense
Basis for allocation
Amount
Administrative
Square feet of floor space
$ 15,000
Advertising
Amount of dollar sales
$ 8,000
The following information is available for its three operating (sales) departments:
Department Square
Feet
Dollar
Sales
Produce 1,000 $ 80,000
Bakery 800 $ 30,000
Meats 1,200 $ 42,000
Totals 3,000 $ 152,000
What is the total administrative expense allocated to the Meats department?
A) $1,200. B) $6,000. C) $9,000. D) $3,000. E) $4,145.
90
116) 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) relative salaries of division heads.
B) number of students advised from each division.
C) square footage of each division.
D) student graduation rate.
E) number of classes offered in each division.
117) A firm produces and sells two products, Plus and Max. The following information is available
relating to setup costs (a part of factory overhead):
Units produced
Plus
200
Max
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 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 Plus and Max, respectively is:
A) $160.00; $12,800.00.
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B) $.80; $.80.
C) $4.00; $4.00.
D) $3.20; $3.20.
E) $200.00; $16,000.00.
118) A firm produces and sells two products, Plus and Max. The following information is available
relating to setup costs (a part of factory overhead):
Units produced
Plus
200
Max
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 Plus and Max, respectively is:
A) $54.00; $27.00.
B) $108.00; $2.70.
C) $60.00; $60.00.
D) $200.00; $16,000.00
E) $21.60; $.54.
119) Rent and maintenance expenses would most likely be allocated based on:
A) Sales volume by department.
B) Number of employees in each department.
C) Square feet of floor space occupied.
D) Number of invoices processed.
E) Number of hours worked.
120) In the preparation of departmental income statements, the preparer completes the following steps in
the following order:
A) Identify indirect expenses; allocate direct expenses; allocate service department expenses.
B) Identify service department expenses; allocate direct expenses; allocate indirect expenses.
C) Identify direct expenses; allocate service department expenses; allocate indirect expenses.
D) Allocate all expenses.
E) Identify direct expenses; allocate indirect expenses; allocate service department expenses.
121) Marian Corporation has two separate divisions that operate as profit centers. The following
information is available for the most recent year:
Black Division
Navy Division
Sales (net)
$ 200,000
$ 400,000
Salary expense
28,000
48,000
Cost of goods sold
100,000
159,000
The Black Division occupies 20,000 square feet in the plant. The Navy 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 Black and Navy Divisions, respectively.
A) $52,000; $163,000.
B) $72,000; $163,000.
C) $100,000; $241,000.
D) $172,000; $352,000.
E) $72,000; $193,000.
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122) Marian Corporation has two separate divisions that operate as profit centers. The following
information is available for the most recent year:
Black Division
Navy Division
Sales (net)
$ 200,000
$ 400,000
Salary expense
28,000
48,000
Cost of goods sold
100,000
159,000
The Black Division occupies 20,000 square feet in the plant. The Navy 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 Black and Navy Divisions,
respectively.
A) $100,000; $241,000.
B) $72,000; $163,000.
C) $72,000; $193,000.
D) $52,000; $163,000.
E) $172,000; $352,000.
123) Fallow Corporation has two separate profit centers. The following information is available for the
most recent year:
West Division
East Division
Sales (net)
$ 200,000
$ 350,000
Salary expense
26,000
40,000
Cost of goods sold
80,000
175,000
The West Division occupies 5,000 square feet in the plant. The East Division occupies 3,000 square
feet. Rent, which was $40,000 for the year, is an indirect expense and is allocated based on square
footage. Compute operating income for the West Division.
A) $69,000. B) $94,000. C) $54,000. D) $95,000. E) $120,000.
124) The amount by which a department’s sales exceed its direct expenses is:
A) Contribution margin.
B) Departmental profit.
C) Departmental contribution to overhead.
D) Net sales.
E) Gross profit.
125) Departmental contribution to overhead is calculated as the amount of sales of the department less:
A) Joint costs.
B) Direct expenses.
C) Controllable costs.
D) Direct and indirect costs.
E) Product and period costs.
126) The Menswear Department of Major’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 Menswear Department’s contribution to overhead as a percent of sales is:
A) 66.7%. B) 7.8%. C) 29.5%. D) 85.4%. E) 14.9%.
127) Ultimo Co. operates three production departments as profit centers. The following information is
available for its most recent year. Department 1’s contribution to overhead as a percent of sales is:
Dept.
Sales
Cost of Goods Sold
Direct Expenses
Indirect Expenses
1
$ 1,000,000
$ 700,000
$ 100,000
$ 80,000
2
400,000
150,000
40,000
100,000
3
700,000
300,000
150,000
20,000
A) 52.5% B) 57.1% C) 30.0% D) 35.7% E) 20.0%
100
128) Ultimo Co. operates three production departments as profit centers. The following information is
available for its most recent year. Department 2’s contribution to overhead in dollars is:
Dept.
Sales
Cost of Goods Sold
Direct Expenses
Indirect Expenses
1
$ 1,000,000
$ 700,000
$ 100,000
$ 80,000
2
400,000
150,000
40,000
100,000
3
700,000
300,000
150,000
20,000
A) $260,000. B) $350,000. C) $210,000. D) $10,000. E) $150,000.
129) Ultimo Co. operates three production departments as profit centers. The following information is
available for its most recent year. Which department has the greatest departmental contribution to
overhead (in dollars) and what is the amount contributed?
Dept.
Sales
Cost of Goods Sold
Direct Expenses
Indirect Expenses
1
$ 1,000,000
$ 700,000
$ 100,000
$ 80,000
2
400,000
150,000
40,000
100,000
3
700,000
300,000
150,000
20,000