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Indicate whether the statement is true or false.
1. Support departments are sometimes called service departments because they provide services to other departments.
a.
True
b.
False
2. The final step in using activity-based costing to apply overhead to products is applying production activity costs to
products using cost drivers for each production activity.
a.
True
b.
False
3. The sequential method of allocating support department costs to production using the ABC method is the easiest and
most accurate.
a.
True
b.
False
4. Goods of low value that are produced from a joint production process are called waste.
a.
True
b.
False
5. When multiple manufacturing processes generate a single output, it is called a joint manufacturing process.
a.
True
b.
False
6. It is sometimes difficult, if not impossible, to find an appropriate cost driver for applying support department costs.
a.
True
b.
False
7. None of the four common methods for allocating joint costs will consistently allocate joint costs more accurately than
another.
a.
True
b.
False
8. Managers will often find it necessary to use a subjective determination regarding the most appropriate method to use
for allocating joint costs.
a.
True
b.
False
9. The reciprocal services method of allocating support department costs to production using the ABC method is the most
difficult and most accurate method.
a.
True
b.
False
10. It is more accurate to ignore support department costs when determining product costs.
a.
True
b.
False
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11. The direct method of allocating support department costs to production using the ABC method is the easiest and most
accurate.
a.
True
b.
False
12. Overhead can be applied to products using one of three different methods: single plantwide rate, multiple production
department rates, and activity-based costing.
a.
True
b.
False
13. Support departments incur direct costs such as the cost of wages and salaries for employees who work in a machine
maintenance department.
a.
True
b.
False
14. A support department provides a necessary service to produce a product.
a.
True
b.
False
15. While none of the four common methods for allocating joint costs will consistently allocate joint costs more
accurately than another, one method may be more appropriate than another depending on the production process.
a.
True
b.
False
16. The outputs generated from a joint manufacturing process are called joint costs.
a.
True
b.
False
17. The sequential method of allocating support department costs to production departments using ABC ignores the reality
that some support departments may also serve other support departments.
a.
True
b.
False
18. The direct method of allocating support department costs to production using the ABC method is the easiest and least
accurate.
a.
True
b.
False
19. The physical units method of joint cost allocation uses market values in the allocation process.
a.
True
b.
False
20. In the process of applying overhead using multiple production department rates, overhead costs are directly traced to
support and production departments and are then allocated to production departments based on the amount of support
activity used by each department.
a.
True
b.
False
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21. The physical units method and the weighted average method are the only two common methods for allocating joint
costs.
a.
True
b.
False
22. Before the split-off point, costs are not traced to the individual joint products because the costs are needed for both
products.
a.
True
b.
False
23. Under the reciprocal method of allocating support department costs to production departments using ABC, any inter-
support-department usages are ignored.
a.
True
b.
False
24. Because support department costs are directly related to production, they are easily applied to products.
a.
True
b.
False
25. The direct, sequential, and reciprocal services methods of allocating support department costs to production
departments using ABC require a three-step process.
a.
True
b.
False
26. The process for allocating support activity costs with activity-based costing is similar to that used with a single
plantwide rate.
a.
True
b.
False
27. Under the reciprocal services method of allocating support department costs to production departments using ABC, all
inter-support-department services are considered in the allocation process.
a.
True
b.
False
28. Under the direct method of allocating support department costs to production departments using ABC, all support
department costs are allocated directly to production departments.
a.
True
b.
False
29. The direct, sequential, and reciprocal services methods of allocating support department costs to production
departments using ABC require a six-step process.
a.
True
b.
False
30. In activity-based costing, support department costs are referred to as support activity costs.
a.
True
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a.
True
b.
False
31. Because support department costs are indirectly related to production, they are applied to products as part of overhead.
a.
True
b.
False
32. When using a single plantwide overhead rate, support department costs are separated from all other overhead costs in
the application process.
a.
True
b.
False
33. When using multiple production department rates, there is a maximum of one support department per production
process.
a.
True
b.
False
34. Support departments are normally accounted for as an investment center.
a.
True
b.
False
35. The reciprocal services method of allocating support department costs to production using the ABC method is the
easiest and least accurate.
a.
True
b.
False
36. A major drawback to using a single plantwide rate is that it is applied using a single driver for all overhead costs and it
is unlikely that the driver is appropriate for every type of overhead.
a.
True
b.
False
37. When using ABC to allocate overhead, there are only two commonly used methods: the direct method and the
sequential method.
a.
True
b.
False
38. Support departments are sometimes called production departments because the two terms mean the same thing.
a.
True
b.
False
39. Because support department costs are directly related to production, they are applied to product costs as a part of
direct labor.
a.
True
b.
False
40. When a single plantwide overhead rate is used to apply overhead to products, support department costs are included
with all other overhead costs and are applied using a single cost driver.
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b.
False
41. If a company considers support department costs to be facility-level costs, product costs may be inaccurate because
certain products use support department services more heavily than others.
a.
True
b.
False
42. Managers at Valvco, Inc., will need to undertake an analysis and interpretation of product costs that include joint costs
with great care and understanding.
a.
True
b.
False
43. The sequential method of allocating support department costs to production departments using ABC is also known as
the step-down method.
a.
True
b.
False
44. The goal of using any overhead rate is to apply all production costs to the product.
a.
True
b.
False
45. The market value at split-off method of allocating joint costs is easy to apply because estimating market value at the
split-off point is always possible and is very accurate.
a.
True
b.
False
46. One of the reasons that James Company needs to estimate the costs of its joint products is to determine selling prices
for them.
a.
True
b.
False
47. The outputs generated from the joint manufacturing process are called joint products.
a.
True
b.
False
48. Falco Industries may want to use the net realizable value method of allocating joint costs because it manufactures
many products that are processed further after the split-off point and will be sold for a much higher price after the
additional processing.
a.
True
b.
False
49. Under the sequential method of allocating support department costs to production departments using ABC, support
department costs are allocated back to support departments from which costs have already been allocated.
a.
True
b.
False
50. After the split-off point, new costs incurred are not traced to the individual joint products because the costs are needed
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for both products.
a.
True
b.
False
51. When using multiple production department rates, all overhead costs are allocated to production departments and none
of them are directly traced to support departments.
a.
True
b.
False
52. Joint costs are inseparable after the split-off point.
a.
True
b.
False
53. The Maintenance Department that services machines used in the production process is an example of a support
department.
a.
True
b.
False
54. The revenues from by-products may be used to offset the costs of the joint production process or they may be reported
as other revenue on the income statement (with no related cost of goods sold).
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
55. Johnson Lumber Mill produces various grades of cut boards from raw lumber. The costs incurred once the cut boards
are separated and processed further are
a.
investment center costs
b.
joint costs that cannot be separated
c.
new costs that can be traced to the various grades of lumber being produced
d.
new costs that cannot be traced to the various grades of lumber being produced
56. When a single manufacturing process generates multiple outputs, it is called a(n)
a.
multiple output manufacturing process
b.
activity-based manufacturing process
c.
joint manufacturing process
d.
joint activity manufacturing process
57. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced.
It allocates Cafeteria Department costs based on the number of employees served. It has the following information about
its two service departments and two production departments, Cutting and Assembly:
Square Feet
Number of
Employees
Janitorial Department
100
20
Cafeteria Department
10,000
10
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Cutting Department
2,000
60
Assembly Department
8,000
20
The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is
a.
75%
b.
22.2%
c.
25%
d.
18.2%
58. McBride’s Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at
the split-off point. It also incorporates a processing time weight factor of 1 for the cream and 3 for the skimmed milk. The
amount of this cost that will be allocated to cream using the weighted average method is
a.
$1,000
b.
$900
c.
$100
d.
$250
59. In which of the following scenarios would it be more appropriate to use the market value at split-off method of joint
cost allocation?
a.
when the products are easily measured by physical units that represent the relative market values of the final
products
b.
when products require extensive and complicated processing beyond the split-off point and none of the
products are sold at split-off
c.
when one or more products are sold at split-off and the other products require little further processing beyond
split-off
d.
when the process is simple and there is little difference between the market values of the joint products at
split-off
60. Which of the following statements is false about the order in which management determines the sequencing of support
department allocations under the sequential method of allocating support department costs to production departments?
a.
Departments with more employees are allocated earlier.
b.
Departments with more accurate cost drivers are allocated earlier.
c.
Departments serving a large number of support departments are allocated earlier.
d.
Departments with higher costs are allocated earlier.
61. Which of the following is the easiest but least accurate of the commonly used methods for allocating support
department costs to production departments?
a.
direct method
b.
sequential method
c.
reciprocal services method
d.
activity-based management method
62. Which of the following methods allocates joint costs based on physical units that are weighted and then multiplied by
actual physical units?
a.
physical units method
b.
weighted average method
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a.
investment center costs
c.
market value at split-off method
d.
net realizable value method
63. The net realizable method of allocating joint costs is most suitable for processes where
a.
physical measures are the most accurate way to allocate joint costs
b.
some products can be processed beyond the split-off point and sold for much higher prices
c.
weighted physical measures are the most accurate way to allocate joint costs
d.
market values are hard, if not impossible, to estimate
64. Which of the following is the main feature of support department costs?
a.
They are associated with sales commissions.
b.
They are office supply costs.
c.
They are direct costs.
d.
They are indirect costs.
65. McBride’s Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at
the split-off point. It also incorporates a processing time weight factor of 1 for the cream and 3 for the skimmed milk. The
amount of this cost that will be allocated to skimmed milk using the weighted average method is
a.
$1,000
b.
$900
c.
$100
d.
$750
66. Using the sequential method, Pone Hill Company allocates Janitorial Department costs based on square footage
serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate
Janitorial costs before Cafeteria costs.
It has the following information about its two service departments and two production departments, Cutting and
Assembly:
Costs
Square Feet
Number of
Employees
Janitorial Department
$ 450,000
100
20
Cafeteria Department
200,000
10,000
10
Cutting Department
1,500,000
2,000
60
Assembly Department
3,000,000
8,000
20
How much of the Janitorial Department’s $450,000 costs is allocated to the Cutting Department?
a.
$90,000
b.
$360,000
c.
$45,000
d.
$44,550
67. Johnson Lumber Mill produces various grades of cut boards from raw lumber. The costs incurred before the split-off
point where the cut boards are separated and processed further are
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b.
joint costs that cannot be separated
c.
new costs that can be traced to the various grades of lumber being produced
d.
new costs that cannot be traced to the various grades of lumber being produced
68. McBride’s Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at
the split-off point. The amount of this cost that will be allocated to cream using the physical units method is
a.
$1,000
b.
$750
c.
$250
d.
$0
69. Under the market value at split-off method, if a product is sold at the split-off point, its
a.
estimated sales price is used
b.
actual sales prices is used
c.
prior year sales price is used
d.
weighted average sales price is used
70. Which of the following statements explains the major difference between the sequential method and the reciprocal
services method?
a.
Under the reciprocal services method, some but not all inter-support-department services are allocated to
support departments.
b.
Under the reciprocal services method, all inter-support-department services are allocated to support
departments.
c.
The reciprocal services method is less accurate than the sequential method.
d.
The reciprocal services method is easier to implement than the sequential method.
71. Which of the following methods allocates joint costs using a measure such as pounds, gallons, or inches at the split-off
point?
a.
physical units method
b.
weighted average method
c.
market value at split-off method
d.
net realizable value method
72. Which of the following statements explains the major difference between the sequential method and the direct
method?
a.
Under the sequential method, the total support department costs to be allocated will also include any costs that
were allocated to that support department from other support departments.
b.
Under the direct method, the total support department costs to be allocated will also include any costs that
were allocated to that support department from other support departments.
c.
Under the sequential method, the total support department costs to be allocated will never include any costs
that were allocated to that support department from other support departments.
d.
Under the sequential method, every support department receives costs allocated from every other support
department.
73. Which of the following statements is false regarding the six-step process as it is utilized in the reciprocal services
method?
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a.
Steps 1–3 of the reciprocal services method are the same as for the direct and sequential methods.
b.
In Step 4, the proportional usage of each support department’s cost driver by the other departments to which
its costs are to be allocated is determined.
c.
In Step 5, support department costs are allocated sequentially among the departments by using a single
algebraic equation.
d.
In Step 6, production department costs are applied to products.
74. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced.
It allocates Cafeteria Department costs based on the number of employees served. It has the following information about
its two service departments and two production departments, Cutting and Assembly:
Square Feet
Number of
Employees
Janitorial Department
100
20
Cafeteria Department
10,000
10
Cutting Department
2,000
60
Assembly Department
8,000
20
If the Janitorial Department incurs costs of $200,000, how much of that cost is allocated to the Cutting Department?
a.
$40,000
b.
$160,000
c.
$20,000
d.
$19,800
75. An example of the split-off point in a lumber mill that produces cut boards from raw timber is that point where
a.
logs brought in from timber stands are scaled and measured
b.
logs are debarked
c.
cut boards are separated into grades
d.
logs are squared away before being cut into boards
76. Joint costs are inseparable
a.
before the split-off point
b.
after the split-off point
c.
before the joint manufacturing process begins
d.
after the joint products have been sold
77. Using the reciprocal services method, which of the following equations represents the correct algebraic expression to
determine Janitorial Department costs when the total costs of the Janitorial Department (J) include not only $500,000 of
direct costs but also 25% of the Maintenance Department (M) cost and the Maintenance Department includes not only
$450,000 of direct costs but also 30% of the Janitorial Department? (Hint: This equation is derived from the two separate
equations representing each department’s costs.)
a.
J = $500,000 + [(0.25 ÷ $450,000) + (0.30 ÷ J)]
b.
J = ($500,000 × 0.25) + [($450,000 × 0.20) + J]
c.
J = $500,000 – (0.25 × $450,000) – (0.20 × J)
d.
J = $500,000 + {0.25 × [$450,000 + (0.20 × J)]}
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78. The following list includes descriptions of the steps in the six-step process to allocate support department costs to
production departments. Which of the following descriptions is incorrectly paired to the step number?
a.
Step 1: Apply production department costs to products.
b.
Step 2: Select a cost driver for each department.
c.
Step 3: Determine the usage of the support department cost river by each department.
d.
Step 4: Determine the percentage usage of support department cost drivers by each department.
79. Support department costs are applied to products as a part of
a.
fixed manufacturing costs
b.
variable cost of goods sold
c.
fixed selling and administrative expenses
d.
overhead
80. Using the reciprocal services method, which of the following equations represents the algebraic expressions for the
two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $500,000 of direct
costs but also 25% of the Maintenance Department (M) cost and the Maintenance Department that includes not only
$450,000 of direct costs but also 30% of the Janitorial Department?
a.
J = $500,000 + (0.25 ÷ M) and M = $450,000 + (0.30 ÷ J)
b.
J = ($500,000 × 0.25) + M and M = ($450,000 × 0.20) + J
c.
J = $500,000 – (0.25 × M) and M = $450,000 – (0.20 × J)
d.
J = $500,000 + (0.25 × M) and M = $450,000 + (0.20 × J)
81. A key aspect to the multiple production department rate method for overhead application is
a.
choosing an appropriate cost driver for each product manufactured
b.
choosing an appropriate cost driver for each production department
c.
choosing an appropriate number of support departments to include in overhead
d.
determining the amount of support activity used by the entire production facility
82. When weight factors are used in the weighted average method, they are
a.
multiplied by the actual physical units to arrive at weighted physical units
b.
divided by the actual physical units to arrive at weighted physical units
c.
added to the actual physical units to arrive at weighted physical units
d.
subtracted from the actual physical units to arrive at weighted physical units
83. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced.
It allocates Cafeteria Department costs based on the number of employees served. It has the following information about
its two service departments and two production departments, Cutting and Assembly:
Square Feet
Number of
Employees
Janitorial Department
100
20
Cafeteria Department
10,000
10
Cutting Department
2,000
60
Assembly Department
8,000
20
The percentage (proportional) usage of the Janitorial Department by the Cutting Department is
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a.
20%
b.
80%
c.
10%
d.
9.9%
84. Which of the following methods allocates joint costs based on the potential market value at the point where the
products will be separated to be processed further?
a.
physical units method
b.
weighted average method
c.
market value at split-off method
d.
net realizable value method
85. Miller Safety Equipment uses multiple production department rates to apply overhead to products. The company will
allocate support department costs to production departments based on the amount of support activity
a.
used by the department
b.
budgeted by the department
c.
used by the department in the prior month
d.
used by the entire production facility
86. Which of the following explains why it is difficult to apply support department costs, such as janitorial services, to
products?
a.
It is difficult to measure the costs.
b.
The costs cannot be quantified in the general ledger.
c.
Appropriate cost drivers are difficult, if not impossible, to determine.
d.
Support department activities are hard to define.
87. Which of the following statement is false?
a.
All direct costs of the support department are accumulated in the department cost center.
b.
Support departments may incur both variable and fixed costs, such as salaries and wages.
c.
Support departments incur only variable factory overhead costs.
d.
General factory overhead, such as depreciation, may be assigned to a support department.
88. Which of the following is not one of the four common methods for allocating joint costs?
a.
physical units method
b.
joint costs method
c.
market value at split-off method
d.
net realizable value method
89. Which of the following is a drawback in using a single plantwide rate to apply overhead to product costs?
a.
Support department costs are not combined with all other overhead costs.
b.
A single driver is used for all overhead costs and it is unlikely that the driver selected is appropriate for every
type of overhead.
c.
Some overhead costs are missing from the application process.
d.
Too much emphasis is placed on the fact that manufacturing processes differ from one product to another.
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90. A key difference between using multiple production department rates and activity-based costing is
a.
the multiple production department rate method is used to distribute overhead costs to production activities
and activity-based costing is used to distribute overhead costs to production departments
b.
the multiple production department rate method is used to distribute overhead costs to production departments
and activity-based costing is used to distribute overhead costs to production activities
c.
the multiple production department rate method is used to distribute general and administrative costs to
production departments and activity-based costing is used to distribute overhead costs to production activities
d.
the multiple production department rate method is used to distribute general and administrative costs to
production departments and activity-based costing is used to distribute general and administrative costs to
production activities
91. The weighted average method uses weight factors in conjunction with physical measures because
a.
physical units alone are sufficient to provide the most reasonable allocation method
b.
the market value of the joint process should be weighted more heavily towards one of the products
c.
the joint process includes a product that requires extra machine time and creates greater wear and tear on the
processing machines
d.
the net realizable value of one product is greater than that of another product made with the same joint process
92. Under the net realizable method of allocating joint costs, which of the following equations is used to compute the
value of products processed beyond the split-off point?
a.
Net Realizable Value = Selling Price at Split-Off × Quantity
b.
Net Realizable Value = (Final Selling Price × Quantity) + Additional Processing Costs
c.
Net Realizable Value = (Final Selling Price × Quantity) – Additional Processing Costs
d.
Net Realizable Value = (Final Selling Price × Quantity) ÷ Additional Processing Costs
93. Using the reciprocal services method, which of the following equations represents the correct algebraic expression
needed to capture the total costs of a Janitorial Department (J) that includes $350,000 of direct costs and 30% of the
Maintenance Department (M) cost and the Maintenance Department that includes $50,000 of direct costs and 50% of the
Janitorial Department? (Hint: This equation is derived from the two separate equations representing each department’s
costs.)
a.
J = $350,000 + (0.30 ÷ $50,000) + (0.50 ÷ J)
b.
J = ($350,000 × 0.30) + ($50,000 × 0.50) + J
c.
J = $350,000 – [(0.30 × $50,000) – (0.50 × J)]
d.
J = $350,000 + {0.30 × [$50,000 + (0.50 × J)]}
94. Using the appropriate rationale, which of the following scenarios represents the proper determination of the order in
which management should sequence support department allocations under the sequential method of allocating support
department costs to production departments?
a.
A Janitorial support department with 50 employees should be allocated earlier than a Cafeteria support
department with 25 employees.
b.
A Maintenance department with a less accurate cost driver should be allocated earlier than a Cafeteria support
department with an extremely accurate cost driver.
c.
A Purchasing support department that serves one production department should be allocated earlier than a
Janitorial support department serving five production departments.
d.
A Janitorial support department with a cost of $500,000 should be allocated earlier than a Purchasing support
department with a cost of $30,000.
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95. Which of the following statements is false about joint manufacturing processes?
a.
Joint costs are by definition inseparable.
b.
Companies producing joint products often allocate joint costs to individual products.
c.
Product costs are more accurate if joint costs are allocated to individual products.
d.
Joint manufacturing processes are simple and rarely require careful attention from managers when analyzing
and interpreting product costs that include joint costs.
96. Support department costs are normally accounted for as which of the following responsibility center classifications?
a.
profit center
b.
revenue center
c.
investment center
d.
cost center
97. Airco Company is tempted to consider support department costs to be facility-level costs that do not need to be
applied to products. Which of the following explains what is misguided about this approach?
a.
Product costs may be inaccurate because direct labor and direct materials are not correctly accounted for in the
product costing system.
b.
Product costs may be inaccurate because incorrect cost drivers are used.
c.
Product costs may be inaccurate because support department services may be used more heavily by some
products than others.
d.
Product costs may be inaccurate because straight-line depreciation on factory equipment is treated as a general
and administrative expense on the income statement.
98. Using the sequential method, Pone Hill Company allocates Janitorial Department costs based on square footage
serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate
Janitorial costs before Cafeteria costs.
It has the following information about its two service departments and two production departments, Cutting and
Assembly:
Costs
Square Feet
Number of
Employees
Janitorial Department
$ 450,000
100
20
Cafeteria Department
200,000
10,000
10
Cutting Department
1,500,000
2,000
60
Assembly Department
3,000,000
8,000
20
The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is
a.
75%
b.
22.2%
c.
25%
d.
18.2%
99. McBride’s Dairy has 200 gallons of heavy cream and 600 gallons of skimmed milk and has incurred $1,000 of joint
costs at the split-off point. It can sell each product at the split-off point or process it further in relatively similar processes,
so management has decided that the most appropriate method for allocating joint costs is the market value at split-off
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point. One gallon of cream sells for $15, while one gallon of milk sells for $4. How much of the joint cost is allocated to
skimmed milk? Round percentage calculations to the nearest whole percent.
a.
$1,000
b.
$560
c.
$440
d.
$0
100. Using the reciprocal services method, which of the following equations represents the algebraic expression for the
total costs of a Janitorial Department (J) that includes not only $350,000 of direct costs but also 30% of the Maintenance
Departments (M) cost?
a.
J = $350,000 + (0.30 ÷ M)
b.
J = ($350,000 × 0.30) + M
c.
J = $350,000 – (0.30 × M)
d.
J = $350,000 + (0.30 × M)
101. Using the reciprocal services method, which of the following equations represents the algebraic expressions for the
two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $350,000 of direct
costs but also 30% of the Maintenance Department (M) cost and the Maintenance Department that includes not only
$50,000 of direct costs but also 50% of the Janitorial Department?
a.
J = $350,000 + (0.30 ÷ M) and M = $50,000 + (0.50 ÷ J)
b.
J = ($350,000 × 0.30) + M and M = ($50,000 × 0.50) + J
c.
J = $350,000 – (0.30 × M) and M = $50,000 – (0.50 × J)
d.
J = $350,000 + (0.30 × M) and M = $50,000 + (0.50 × J)
102. An example of the split-off point in oil, gasoline, and kerosene production is that point where crude oil is
a.
drilled
b.
pumped from the ground
c.
transported to the refinery
d.
distilled into gasoline and kerosene
103. You are a manager at McBride’s Dairy where whey is a by-product of the production process. Thinking about the
utility and usefulness of by-products in a joint production process, you may decide to take several courses of action.
Which of the following actions would you not recommend?
a.
Because whey is a good of low value, it is not worth the effort to develop separate product costs for it.
b.
The net realizable value method should be used to allocate joint costs to the whey.
c.
Revenues from the whey should be used to offset the cost of the joint production process.
d.
The sale of whey should be reported as other revenue on the income statement with no related cost of goods
sold.
104. An example of the split-off point in dairy production is that point where raw milk is
a.
gathered
b.
stored to be processed
c.
pasteurized
d.
made into butter or cheese
105. A single plantwide overhead application rate
Name:
Class:
Date:
a.
focuses on identifying multiple drivers to apply to every single production department
b.
is likely to result in the most accurate product costs
c.
is likely to result in inaccurate product costs
d.
requires a multiple-step application process from support departments to production departments
106. Under the net realizable method of allocating joint costs, which of the following equations is used to compute the
value of products not processed beyond the split-off point?
a.
Net Realizable Value = Selling Price at Split-Off × Quantity
b.
Net Realizable Value = Selling Price at Split-Off ÷ Quantity
c.
Net Realizable Value = (Final Selling Price × Quantity) – Additional Processing Costs
d.
Net Realizable Value = (Final Selling Price × Quantity) ÷ Additional Processing Costs
107. Which of the following is a true statement with regard to the terms used when referring to manufacturing costs and
the transfer of these costs to departments and products?
a.
Cost application refers to determining the number of cost drivers needed.
b.
Cost assignment refers to transferring overhead costs to support and production departments.
c.
Cost distribution refers to transferring overhead costs to support and production departments.
d.
Allocating costs refers to determining which general ledger accounts to use in the journal entry process.
108. Using the sequential method, Pone Hill Company allocates Janitorial Department costs based on square footage
serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate
Janitorial costs before Cafeteria costs.
It has the following information about its two service departments and two production departments, Cutting and
Assembly:
Costs
Square Feet
Number of
Employees
Janitorial Department
$ 450,000
100
20
Cafeteria Department
200,000
10,000
10
Cutting Department
1,500,000
2,000
60
Assembly Department
3,000,000
8,000
20
The percentage (proportional) usage of the Janitorial Department by the Cutting Department is
a.
20%
b.
80%
c.
10%
d.
9.9%
109. Which of the following is not the type of work done in a support department?
a.
production work on an assembly line that makes a product
b.
janitorial services provided for the production facility
c.
maintenance work done to keep production machines running smoothly
d.
safety and security services provided to keep the production facility safe
Name:
Class:
Date:
110. Which of the following statements is true about the sequential method of allocating support department costs to
production departments?
a.
The sequential method is also known as the step-up method.
b.
The sequential method captures some but not all the inter-support-department services by allocating support
departments to other support departments and production departments in a series of steps.
c.
The sequential method requires that the same cost driver be used for each support department.
d.
The sequential method is less accurate than the direct method.
111. Which of the following statements is true?
a.
Support department cost allocations should be incorporated into a product costing system.
b.
Support department cost allocations should be incorporated into the general accounting system but do not need
to be incorporated into a product costing system.
c.
Support department cost allocations can be ignored for more accurate product costing.
d.
Support department cost allocations should be rolled into the general and administrative costs associated with
the corporate office expenses.
112. Juana, a managerial accountant, notes to her colleague that she is reviewing spreadsheets to determine overhead costs
that need to be transferred to support and production departments. Juana is working on the process to
a.
apply overhead costs
b.
assign overhead costs
c.
distribute overhead costs
d.
allocate overhead costs
113. Which of the following statements is true about the four common methods for allocating joint costs?
a.
None of the methods will consistently allocate joint costs more accurately than another.
b.
It is impossible to determine whether one of the four methods may be more appropriate than another based on
the production process.
c.
The market value at split-off method is always the least appropriate method for allocating joint costs.
d.
The net realizable value method is always the least reliable method for allocating joint costs.
114. McBride’s Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at
the split-off point. The amount of this cost that will be allocated to skimmed milk using the physical units method is
a.
$1,000
b.
$750
c.
$250
d.
$0
115. Which of the following describes how support department costs are related to production?
a.
They are a part of direct labor cost.
b.
They are a part of direct materials cost.
c.
They are a part of the both direct labor and direct materials costs.
d.
They are indirectly related to production.
116. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced.
It allocates Cafeteria Department costs based on the number of employees served. It has the following information about
its two service departments and two production departments, Cutting and Assembly:
Name:
Class:
Date:
Square Feet
Number of
Employees
Janitorial Department
100
20
Cafeteria Department
10,000
10
Cutting Department
2,000
60
Assembly Department
8,000
20
If the Cafeteria Department incurs costs of $500,000, how much of that cost is allocated to the Assembly Department?
a.
$375,000
b.
$111,000
c.
$125,000
d.
$91,000
117. When multiple production department rates are used to apply overhead to products,
a.
all manufacturing costs are first directly traced to support and production departments and then support
department costs are allocated to production departments
b.
only fixed overhead costs are first directly traced to support and production departments and then support
department costs are allocated to production departments
c.
all overhead costs are first directly traced to support and production departments and then support department
costs are allocated to production departments
d.
support department costs are allocated to production departments and then all overhead costs are directly
traced to support and production departments
118. Support departments are sometimes called
a.
indirect departments
b.
cost departments
c.
service departments
d.
activity-based departments
119. Which of the following statements is true about the direct method of allocating support department costs to
production departments?
a.
The direct method is more difficult to use than the sequential method.
b.
The direct method allocates only some of the support department costs directly to production departments and
is more accurate than the reciprocal services method.
c.
The direct method requires that the same cost driver be used for each support department.
d.
The direct method allocates all support department costs directly to production departments thus ignoring the
possibility that some support departments may also serve other support departments.
120. McBride’s Dairy has 200 gallons of heavy cream and 600 gallons of skimmed milk and has incurred $1,000 of joint
costs at the split-off point. It can sell each product at the split-off point or process it further in relatively similar processes,
so management has decided that the most appropriate method for allocating joint costs is the market value at split-off
point. One gallon of cream sells for $15, while one gallon of milk sells for $4. How much of the joint cost is allocated to
cream? Round percentage calculations to the nearest whole percent.
a.
$1,000
b.
$560
Name:
Class:
Date:
c.
$440
d.
$0
121. Which of the following is not one of the methods used for applying overhead?
a.
single plantwide application rate
b.
single investment application rate
c.
multiple production department rates
d.
activity-based costing application method
122. Which of the following is the correct order for allocating overhead costs using activity-based costing?
a.
allocate support activity costs to production activities; determine overhead costs; directly trace and distribute
overhead costs to support and production activities; apply production activity costs to products
b.
determine overhead costs; directly trace and distribute overhead costs to support and production activities;
apply production activity costs to products; allocate support activity costs to production activities
c.
directly trace and distribute overhead costs to support and production activities; determine overhead costs;
allocate support activity costs to production activities; apply production activity costs to products
d.
determine overhead costs; directly trace and distribute overhead costs to support and production activities;
allocate support activity costs to production activities; apply production activity costs to products
123. Carolina, the accountant for Duke Manufacturing, tells her friend, Jacob, who works in customer service for Duke,
that she is writing journal entries to transfer costs to products. Carolina is referring to the
a.
cost application process
b.
cost assignment process
c.
cost distribution process
d.
cost allocation process
124. Which of the following statements is true about joint manufacturing processes?
a.
Joint costs are by definition inseparable.
b.
Companies producing joint products rarely allocate joint costs to individual products.
c.
Product costs are more accurate if joint costs are not allocated to individual products.
d.
Joint manufacturing processes are rare.
125. The point in the production process where joint products become separable is called the
a.
separation point
b.
split-off point
c.
joint cost point
d.
joint process point
126. When activity-based costing is used to apply overhead to products, support department costs are referred to as
a.
support activity costs
b.
department activity costs
c.
multiple activity costs
d.
activity-based department costs
127. Which of the following is not one of the commonly used methods for allocating support department costs to
Name:
Class:
Date:
production departments?
a.
direct method
b.
sequential method
c.
reciprocal services method
d.
activity-based management method
128. Which of the following terms is commonly used to describe the departments within a company that provide a
necessary service to produce a product but are not directly involved in production?
a.
investment center departments
b.
expense departments
c.
costing departments
d.
support departments
129. Which of the following methods allocates joint costs based on measures estimated after the final products are fully
processed and are ready to be sold?
a.
physical units method
b.
weighted average method
c.
market value at split-off method
d.
net realizable value method
130. Which of the following is the most difficult but most accurate of the commonly used methods for allocating support
department costs to production departments?
a.
direct method
b.
sequential method
c.
reciprocal services method
d.
activity-based management method
The following scenarios are encountered by Cooper Industries in several production facilities around the country. As the
managerial accountant, you are asked to choose an appropriate support department cost allocation method. Indicate
whether the scenario warrants the use of a single plantwide rate, multiple production department rates, or activity-based
costing. Use each method only once.
a.
Single plantwide rate
b.
Multiple production department rates
c.
Activity-based costing
131. Scenario 1: Cooper Industries has a plant in Ohio that has three support departments and four production departments
that manufacture four simple products, one in each department. This plant employs 75 people in the production facility
and has two 8-hour shifts running five days a week.
132. Scenario 2: Cooper Industries has a plant in New York that has 50 support departments that perform several
specialized support activities within each. It has 79 production departments that create very complex products in a
multistep process that require many production hours. This plant employs 15,000 people in the production facility and
4,000 people in support roles. It has three 8-hour shifts running six days a week all year round.
133. Scenario 3: Cooper Industries has a plant in Pennsylvania that manufactures one product in one department with 15
Name:
Class:
Date:
employees and one plant supervisor. It runs one 8-hour production shift per day for 4 to 5 days a week, depending on
customer demand.
Match each description below to the appropriate term (a–c).
a.
Allocate
b.
Distribute
c.
Apply
134. Transferring costs to products
135. Transferring overhead costs to support and production departments
136. Transferring costs among departments
Match each description below to the appropriate step in the six-step process for allocating support department costs to
production departments (a–f) Not all steps will be used.
a.
Step 1
b.
Step 2
c.
Step 3
d.
Step 4
e.
Step 5
f.
Step 6
137. Determine the percentage (proportional) usage of support department cost drivers by each department
138. Select a cost driver for each department
139. Directly trace and distribute overhead costs to support and production departments
140. Apply production department costs to products
The following is a list of various departments in Woodbridge, Incorporated, a manufacturing facility. The company makes
food-grade wax-lined paper take-out containers for the food service industry for many popular restaurants. Classify each
department below as either a support department or a production department.
a.
Support
b.
Production
141. Scheduling Department—schedules the products to be made for the week
142. Receiving Department—receives shipments of paper sheet to be used in the week’s production
143. Cafeteria for employees
144. Maintenance Department—makes sure the machines are maintained properly
145. Janitorial Department—makes sure the plant is kept clean for food-grade production
146. Deli-Container Department
Name:
Class:
Date:
147. Sandwich Container Department
148. Payroll Department
149. Human Resources Department
150. Salad Container Department
Match each description below to the appropriate method for allocating costs (a–c).
a.
Single plantwide overhead rate
b.
Multiple production department rates
c.
Activity-based costing
151. Overhead costs are first directly traced or distributed to support and production departments; support department
costs are then allocated to production departments based on the amount of support activity used by each production
department.
152. Support department costs are simply combined with all other overhead costs and total overhead is applied using one
cost driver.
153. Overhead costs are first directly traced or distributed to support and production activities, then support activity costs
are allocated to production activities based on the amount of support activity used by each production activity; production
activity costs are applied to the products using cost drivers for each production activity.
The following scenarios are encountered by Lillie Manufacturing Company in its many production facilities around the
country. As the managerial accountant, you are asked to choose an appropriate support department cost allocation
method. Indicate whether the scenario warrants the use of a single plantwide rate, multiple production department rates,
or activity-based costing. Use each method only once.
a.
Single plantwide rate
b.
Multiple production department rates
c.
Activity-based costing
154. Scenario 1: Lillie Manufacturing has a plant in Wisconsin that manufactures one product in one department with 25
employees and one plant manager. It runs one 8-hour shift a day.
155. Scenario 2: Lillie Manufacturing has a plant in Minnesota that has five support departments that all have several
activities performed within the departments. It has seven production departments that build very complex multistep
products that require many production activities. This plant employs 5,000 people in the production facility and has three
8-hour shifts running six days a week.
156. Scenario 3: Lillie Manufacturing has a plant in Florida that has two support departments that both have limited
activities performed by the departments. It has three production departments that build two simple products. This plant
employs 100 people in the production facility and has two 8-hour shifts running five days a week.
The following is a list of various departments in a diesel engine manufacturing/rebuilding facility. The company makes
diesel engines for the locomotive industry. It also remanufactures its own previously built engines that need to be
overhauled after several years of use. Classify each department below as either a support department or a production
department.
a.
Support
b.
Production
Name:
Class:
Date:
Allocated joint
23,498
25,000
(1,502)
27,948
30,000
(2,052)
25,873
20,000
5,873
157. Tooling Department—ensures that tools for all production areas are where they need to be to build the engines
158. Cost Accounting Department—collects costs of raw materials, labor, and overhead to be applied to engines
159. Remanufacturing Department—works on engines needing overhauled
160. Production Data Entry Department—records data such as raw material usage for each production line
161. Engine Department—builds new engines
162. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Determine the proportional (percentage) usage of the
Cafeteria Department by the (a) Cutting and (b) Assembly departments using the direct method.
163. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Samoa uses the sequential method to allocate support
department costs, first allocating the costs from the Janitorial Department to the Cafeteria, Cutting, and Assembly
departments. Determine the proportional (percentage) usage of the Janitorial Department by the (a) Cafeteria, (b) Cutting,
and (c) Assembly departments.
Scotland Beauty Products (SBP) manufactures face cream, body lotion, and liquid soap in a joint manufacturing process
in one manufacturing facility. SBP has three general managers with each one in charge of a separate product line.
Michelle Tallerico oversees the face cream line, Becky Borger oversees the body lotion line, and Lorie Osho oversees the
liquid soap line. Consider the following performance report for the three general managers and their product lines, where
each line is assigned direct costs and allocated support costs and joint costs.
Michelle Tallerico
Becky Borger
Lorie Osho
Face Cream
Body Lotion
Liquid Soap
Over
Over
Over
(Under)
(Under)
(Under)
Actual
Target
Target
Actual
Target
Target
Actual
Target
Target
Direct materials
$104,567
$107,000
$(2,433)
$178,748
$175,000
$3,748
$146,792
$150,000
$(3,208)
Direct labor
238,102
225,000
13,102
280,928
250,000
30,928
234,857
244,000
(9,143)
Allocated support
costs
598,342
600,000
(1,658)
598,090
625,000
(26,910)
605,342
600,000
5,342
Name:
Class:
Date:
costs
Total production
costs
$964,509
$957,000
$7,509
$1,085,714
$1,080,000
$5,714
$1,012,864
$1,014,000
$(1,136)
164. Using the performance report for Scotland Beauty Products (including support department and joint cost allocations),
evaluate the performance of the three production managers, specifically ranking them based on total costs.
165. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Determine the dollar amount of the Janitorial
Department costs to be allocated to the (a) Cutting and (b) Assembly departments using the direct method.
166. Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process. At
the split-off point, the company has 300 pounds of face cream with a market value of $15 per pound, 200 pounds of body
lotion with a market value of $13 per pound, and 300 pounds of liquid soap with a market value of $7 per pound and has
incurred $200,000 in joint costs.
Using the market value at split-off method, allocate the joint costs to (a) face cream, (b) body lotion, and (c) liquid soap.
Round percentages in intermediate steps to the nearest whole percentage.
167. Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process.
At the split-off point, the company has 300 pounds of face cream, 200 pounds of body lotion, and 300 pounds of liquid
soap and has incurred $200,000 in joint costs.
Using the weighted average method, allocate the joint costs to (a) face cream with a weight factor of 1, (b) body lotion
with a weight factor of 3, and (c) liquid soap with a weight factor of 1.
Scotland Beauty Products (SBP) manufactures face cream, body lotion, and liquid soap in a joint manufacturing process
in one manufacturing facility. SBP has three general managers with each one in charge of a separate product line.
Michelle Tallerico oversees the face cream line, Becky Borger oversees the body lotion line, and Lorie Osho oversees the
liquid soap line. Consider the following performance report for the three general managers and their product lines, where
each line is assigned direct costs and allocated support costs and joint costs.
Michelle Tallerico
Becky Borger
Lorie Osho
Face Cream
Body Lotion
Liquid Soap
Over
Over
Over
(Under)
(Under)
(Under)
Actual
Target
Target
Actual
Target
Target
Actual
Target
Target
Direct materials
$104,567
$107,000
$(2,433)
$178,748
$175,000
$3,748
$146,792
$150,000
$(3,208)
Direct labor
238,102
225,000
13,102
280,928
250,000
30,928
234,857
244,000
(9,143)
Allocated support
costs
598,342
600,000
(1,658)
598,090
625,000
(26,910)
605,342
600,000
5,342
Allocated joint
costs
23,498
25,000
(1,502)
27,948
30,000
(2,052)
25,873
20,000
5,873
Name:
Class:
Date:
Total production
costs
$964,509
$957,000
$7,509
$1,085,714
$1,080,000
$5,714
$1,012,864
$1,014,000
$(1,136)
168. Using the performance report for Scotland Beauty Products (including support department and joint cost allocations),
evaluate the performance of Michelle Tallerico, specifically noting the reasons she missed her target.
169. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Determine the dollar amount of the Cafeteria
Department costs to be allocated to the (a) Cutting and (b) Assembly departments using the direct method.
170. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Determine the proportional (percentage) usage of the
Janitorial Department by the (a) Cutting and (b) Assembly departments using the direct method.
171. Jamison Company uses the reciprocal services method to allocate support department costs and has gathered the
following information:
Janitorial Department Usage
Cafeteria
50%
Cutting
10%
Assembly
40%
Cafeteria Department Usage
Janitorial 20%
Cutting 60%
Assembly 20%
Janitorial Department costs are $450,000.
Cafeteria Department costs are $250,000.
What are the correct equations to represent (a) the total Janitorial (J) costs and (b) the total Cafeteria (C) costs?
172. Jamison Company uses the reciprocal services method to allocate support department costs and has gathered the
following information:
Janitorial Department Usage
Cafeteria
50%
Cutting
10%
Name:
Class:
Date:
Assembly
40%
Cafeteria Department Usage
Janitorial 20%
Cutting 60%
Assembly 20%
Janitorial Department costs are $450,000.
Cafeteria Department costs are $250,000.
What are the correct equations to represent (a) the total Janitorial (J) costs, (b) the total Cafeteria (C) costs, and (c) the
rewritten equation substituting C into J?
173. Jamison Company uses the reciprocal services method to allocate support department costs and has gathered the
following information:
Janitorial Department Usage
Cafeteria
50%
Cutting
10%
Assembly
40%
Cafeteria Department Usage
Janitorial 20%
Cutting 60%
Assembly 20%
Janitorial Department costs are $450,000.
Cafeteria Department costs are $250,000.
What is the total Janitorial Department cost using the reciprocal services method?
Scotland Beauty Products (SBP) manufactures face cream, body lotion, and liquid soap in a joint manufacturing process
in one manufacturing facility. SBP has three general managers with each one in charge of a separate product line.
Michelle Tallerico oversees the face cream line, Becky Borger oversees the body lotion line, and Lorie Osho oversees the
liquid soap line. Consider the following performance report for the three general managers and their product lines, where
each line is assigned direct costs and allocated support costs and joint costs.
Michelle Tallerico
Becky Borger
Lorie Osho
Face Cream
Body Lotion
Liquid Soap
Over
Over
Over
(Under)
(Under)
(Under)
Actual
Target
Target
Actual
Target
Target
Actual
Target
Target
Direct materials
$104,567
$107,000
$(2,433)
$178,748
$175,000
$3,748
$146,792
$150,000
$(3,208)
Direct labor
238,102
225,000
13,102
280,928
250,000
30,928
234,857
244,000
(9,143)
Allocated support
costs
598,342
600,000
(1,658)
598,090
625,000
(26,910)
605,342
600,000
5,342
Allocated joint
costs
23,498
25,000
(1,502)
27,948
30,000
(2,052)
25,873
20,000
5,873
Total production
costs
$964,509
$957,000
$7,509
$1,085,714
$1,080,000
$5,714
$1,012,864
$1,014,000
$(1,136)
174. Using the performance report for Scotland Beauty Products (including support department and joint cost allocations),
Name:
Class:
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evaluate the performance of Becky Borger. What two important items stand out regarding the performance of her
department?
175. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Samoa uses the sequential method to allocate support
department costs, first allocating the costs from the Janitorial Department to the Cafeteria, Cutting, and Assembly
departments. Determine the dollar amount of the Janitorial Department costs to be allocated to the (a) Cafeteria, (b)
Cutting, and (c) Assembly departments.
Scotland Beauty Products (SBP) manufactures face cream, body lotion, and liquid soap in a joint manufacturing process
in one manufacturing facility. SBP has three general managers with each one in charge of a separate product line.
Michelle Tallerico oversees the face cream line, Becky Borger oversees the body lotion line, and Lorie Osho oversees the
liquid soap line. Consider the following performance report for the three general managers and their product lines, where
each line is assigned direct costs and allocated support costs and joint costs.
Michelle Tallerico
Becky Borger
Lorie Osho
Face Cream
Body Lotion
Liquid Soap
Over
Over
Over
(Under)
(Under)
(Under)
Actual
Target
Target
Actual
Target
Target
Actual
Target
Target
Direct materials
$104,567
$107,000
$(2,433)
$178,748
$175,000
$3,748
$146,792
$150,000
$(3,208)
Direct labor
238,102
225,000
13,102
280,928
250,000
30,928
234,857
244,000
(9,143)
Allocated support
costs
598,342
600,000
(1,658)
598,090
625,000
(26,910)
605,342
600,000
5,342
Allocated joint
costs
23,498
25,000
(1,502)
27,948
30,000
(2,052)
25,873
20,000
5,873
Total production
costs
$964,509
$957,000
$7,509
$1,085,714
$1,080,000
$5,714
$1,012,864
$1,014,000
$(1,136)
176. Using the performance report for Scotland Beauty Products (including support department and joint cost allocations),
evaluate the performance of Michelle Tallerico compared to Lorie Osho. What important items stand out regarding the
performance of the departments compared to each other?
177. Departmental information for the four departments at Samoa Industries is provided below.
Total Cost
Cost Driver
Square Feet
Number of Employees
Janitorial
$ 150,000
Square footage serviced
200
40
Cafeteria
50,000
Number of employees
20,000
12
Cutting
1,125,000
4,000
120
Assembly
1,100,000
16,000
40
The Janitorial and Cafeteria departments are support departments. Samoa uses the sequential method to allocate support
department costs, first allocating the costs from the Janitorial Department to the Cafeteria, Cutting, and Assembly
departments.
Name:
Class:
Date:
1. Determine the dollar amount of the Janitorial Department costs to be allocated to the (a) Cafeteria, (b) Cutting,
and (c) Assembly departments.
2. Determine the dollar amount of the Cafeteria Department costs to be allocated to the (a) Cutting and (b) Assembly
departments.
178. Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process.
At the split-off point, the company has 300 pounds of face cream, 200 pounds of body lotion, and 300 pounds of liquid
soap and has incurred $200,000 in joint costs.
Using the physical units method, allocate the joint costs to (a) face cream, (b) body lotion, and (c) liquid soap.
179. Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process.
At the split-off point, the company has 300 pounds of face cream with a market value of $15 per pound, 200 pounds of
body lotion with a market value of $13 per pound, and 300 pounds of liquid soap with a market value of $7 per pound and
has incurred $200,000 in joint costs. The net realizable value (NRV) of the face cream is $7,500, the NRV of the body
lotion is $3,500, and the NRV of the liquid soap is $4,000.
Using the net realizable value method, allocate the joint costs to (a) face cream, (b) body lotion, and (c) liquid soap.
Round percentages in intermediate steps to the nearest whole percentage.
180. The following is a list of the steps for using multiple production department rates to apply overhead to products. Put
them in the proper order by item letter.
a.
Apply production department costs to products.
b.
Determine overhead costs to be allocated.
c.
Allocate support department costs to production departments.
d.
Directly trace and distribute overhead costs to support and production departments.
181. The following list includes the six steps used when allocating support department costs to production departments
regardless of the method (i.e., single plantwide rate, multiple production department rates, or activity-based costing)
chosen. Put them in the correct order by letter.
a.
Apply production department costs to products.
b.
Allocate support department costs by multiplying the support department costs by the percentage usage of
each department.
c.
Determine the percentage usage of support department cost drivers by each department.
d.
Determine the usage of the support department cost driver by each department.
e.
Select a cost driver for each department.
f.
Directly trace and distribute overhead costs to support and production departments.
182. The following is a list of the steps taken when using ABC to apply overhead to products. Put them in the proper order
by item letter.
a.
Directly trace and distribute overhead costs to support and production activities.
b.
Determine overhead costs to be allocated.
c.
Allocate support activity costs to production activities.
d.
Apply production activity costs to products.
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