86. Fairfield Company allocates common Building Department costs to producing departments (P1 and P2)
based on space occupied, and it allocates common Personnel Department costs based on the number of
employees. Space occupancy and employee data are as follows:
Building
Personnel
Dept. P1
Dept. P2
Space occupied
2,000 ft.
10,000 ft.
120,000 ft.
70,000 ft.
Employees
6
10
80
50
If Fairfield Company uses the direct allocation method, the ratio representing the portion of building costs allocated to Department P1 is
87. Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2).
Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated
on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
S1
S2
P1
P2
Direct dept. costs
$7,500
$11,000
$27,500
$30,000
Number of employees
10
5
20
25
Space occupied (sq. ft.)
1,000
500
1,500
2,500
If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is
88. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. Using the direct method, the cost of the Maintenance Department allocated to Department P1 is
89. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. Using the direct method, the cost of the Personnel Department allocated to Department P1 is
90. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated
first, the cost of the support departments allocated to Department P1 is
91. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated
first, the cost of the Maintenance Department allocated to Department P1 is
92. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. What is the combined total department costs for the producing departments after allocation of the support departments?
93. Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000
are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on
the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000,
respectively.
Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
100
50
300
150
10
20
90
90
50
50
250
250
Refer to Figure 7-6. What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the
direct method?
94. Andover,, Inc., has two producing departments. Each producing department is held responsible for a share
of the costs of a support department.
Actual and budgeted data are as follows:
Support department hours used:
Department L
12,000
Department M
4,000
Total hours
16,000
Support department costs:
Actual support department costs
$48,000
Budgeted fixed department costs
$20,000
Budgeted variable rate per hour
$2.50
Normal support department usage is 8,000 hours each for Department L and Department M. Assuming the direct method is used and the purpose is
product costing, support department costs allocated to Department L are
95. Andover, Inc., has two producing departments. Each producing department is held responsible for a share of
the costs of a support department.
Actual and budgeted data are as follows:
Support department hours used:
Department X
12,000
Department Y
4,000
Total hours
16,000
Support department costs:
Actual support department costs
$48,000
Budgeted fixed department costs
$20,000
Budgeted variable rate per hour
$2.50
Normal support department usage is 8,000 hours each for Department X and Department Y. Assuming the direct method is used and the purpose is
performance evaluation, support department costs allocated to Department X are
96. Astoria Savings & Loans of New York has three revenue-generating departments: Consumer accounts,
Commercial accounts, and Loans. The bank also has three service areas: administration, personnel, and
accounting. The direct costs per month and the interdepartmental service structure are shown below:
Percentage of
Service Used by
Dept.
Costs
Admin.
Pers.
Acctg.
Consumer
Comm’l
Loans
Administration
$40,000
–
10
10
40
20
20
Personnel
23,000
10
–
10
20
40
20
Accounting
30,000
10
10
–
20
20
40
Consumer
41,000
Commercial
25,000
Loans
16,000
How much cost would be allocated to the Commercial account area from administration using the direct method?
97. Which of the following allocation methods assumes “step-down” interdepartmental services?
98. Which of the following would NOT be a criteria used to rank departments to determine order of allocation
under the sequential method?
99. Lennon Company has two support departments, Maintenance Department and Personnel Department, and
two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis
of standard service used. The Personnel Department costs of $6,000 are allocated on the basis of number of
employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
100
50
300
150
Number of employees
5
10
45
45
Direct labor hours
50
50
250
250
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department X assuming the direct method is used?
100. Which of the following allocation methods fully recognizes services that support departments provide to
each other?
101. The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings
accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct
costs per month and the interdepartmental service structure are shown below:
Percentage of
Service Used by
Dept.
Costs
Admin.
Pers.
Acctg.
Check.
Sav.
Loans
Administration
$40,000
–
10
10
40
20
20
Personnel
23,000
10
–
10
20
40
20
Accounting
30,000
10
10
–
20
20
40
Checking
41,000
Savings
25,000
Loans
16,000
The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration,
personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method?
(Round to two decimal places.)
102. Tec-Pro Company has two support departments (S1 and S2) and two producing departments (P1 and P2).
Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated
on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
S1
S2
P1
P2
Direct dept. costs
$7,500
$11,000
$27,500
$30,000
Number of employees
10
5
20
25
Space occupied (sq. ft.)
1,000
500
1,500
2,500
When Tec-Pro uses the sequential method, the support department allocated first is the one with the highest percentage of interdepartmental service.
The choice of the department allocated first is determined by the comparison of the following ratio for S1 and S2, respectively:
103. McHugh Company allocates common Building Department costs to producing departments (P1 and P2)
based on space occupied, and it allocates common Personnel Department costs based on the number of
employees. Space occupancy and employee data are as follows:
Building
Personnel
Dept. P1
Dept. P2
Space occupied
2,000 ft.
10,000 ft.
120,000 ft.
70,000 ft.
Employees
6
10
80
50
If McHugh Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is
allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is
104. Rodriguez Manufacturing prices its products at full cost plus 40 percent. The company operates two
support departments and two producing departments. Budgeted costs and normal activity levels are as follows:
Support Departments
Producing
Departments
A
B
C
D
Overhead costs
$20,000
$50,000
$90,000
$120,000
Square feet
2,000
2,400
4,000
12,000
Number of employees
20
30
60
40
Direct labor hours
–
–
10,000
6,400
Machine hours
–
–
6,000
10,800
Support Department A’s costs are allocated based on square feet, and Support Department B’s costs are allocated based on number of employees.
Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours.
One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for
the product cost $45 per unit, and direct labor is $20 per unit.
If the sequential method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be (round
service allocations to the nearest whole dollar and the costs per unit to two decimal places)
105. Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y).
Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%.
Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%.
Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.
What is S1’s cost equation?
106. Oxide Company has two support departments (S1 and S2) and two producing departments (X and Y).
Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%.
Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%.
Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.
What is S2’s cost equation?
107. Hunghi Company has three support departments whose direct department costs are $35,000, $45,000, and
$55,000, respectively, and two producing departments whose direct department costs are $400,000 and
$360,000, respectively. The combined total department cost for the producing departments after allocation of
the support departments is
108. Howard Company has two support departments (S1 and S2) and two producing departments (P1 and P2).
Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated
on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
S1
S2
P1
P2
Direct dept. costs
$7,500
$11,000
$27,500
$30,000
Number of employees
10
5
20
25
Space occupied (sq. ft.)
1,000
500
1,500
2,500
If Howard used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is
109. Abound Company has two support departments (S1 and S2) and two producing departments (X and Y).
Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%.
Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%.
Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.
What are the total costs to be allocated from Department S1?
110. Abound Company has two support departments (S1 and S2) and two producing departments (X and Y).
Department S1 serves Departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%.
Department S2 serves Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%.
Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.
What are the total costs to be allocated from Department S2?
111. The following information pertains to Amon Schrock Corporation:
Support
Departments
Producing
Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$80,000
$144,000
$280,000
$320,000
Direct labor hours
4,000
5,000
16,000
20,000
Machine hours
–
–
24,000
16,000
Number of employees
16
20
60
100
Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of
employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two
decimal places) is
112. Ely Company has two support departments, Maintenance Department and Personnel Department, and two
producing departments, X and Y. The Maintenance Department costs of $60,000 are allocated on the basis of
standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of
employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
100
50
300
150
Number of employees
5
10
45
45
Direct labor hours
50
50
250
250
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department Y assuming the direct method is used?
113. Morton Manufacturing Company has two support departments, Maintenance Department and Personnel
Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are
allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated
on the basis of number of employees. The direct costs of Departments X and Y are $27,000 and $45,000,
respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
200
150
1,200
600
Number of employees
25
50
75
75
Direct labor hours
250
250
1,000
500
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department X assuming the direct method is used?
114. Alliance Manufacturing Company has two support departments, Maintenance Department and Personnel
Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are
allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated
on the basis of number of employees. The direct costs of Departments X and Y are $27,000 and $45,000,
respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
200
150
1,200
600
Number of employees
25
50
75
75
Direct labor hours
250
250
1,000
500
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department Y assuming the direct method is used?
115. Santiago Manufacturing prices its products at full cost plus 40 percent. The company operates two support
departments and two producing departments. Budgeted costs and normal activity levels are as follows:
Support Departments
Producing
Departments
A
B
C
D
Overhead costs
$20,000
$50,000
$90,000
$120,000
Square feet
2,000
2,400
4,000
12,000
Number of employees
20
30
60
40
Direct labor hours
–
–
10,000
6,400
Machine hours
–
–
6,000
10,800
Support Department A’s costs are allocated based on square feet, and Support Department B’s costs are allocated based on number of employees.
Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours.
One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for
the product cost $45 per unit, and direct labor is $20 per unit.
If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be
116. Gravity Company has two support departments, Maintenance Department (MD) and Personnel Department
(PD), and two producing departments, P1 and P2. The Maintenance Department costs of $120,000 are allocated
on the basis of standard service hours used. The Personnel Department costs of $18,000 are allocated on the
basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and $60,000,
respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Dept.
Person.
Dept.
Dept.
P1
Dept.
P2
Standard service hours used
400
200
1,200
600
Number of employees
20
40
180
180
Direct labor hours
200
200
1,000
1,000
What are the total overhead costs associated with P1 after allocating the Maintenance and Personnel Departments using the direct method?
117. Hotchkiss Company has two support departments, Maintenance Department (MD) and Personnel
Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $90,000
are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are
allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and
$60,000, respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Dept.
Person.
Dept.
Dept.
P1
Dept.
P2
Standard service hours used
400
200
1,200
600
Number of employees
20
40
180
180
Direct labor hours
200
200
1,000
1,000
What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?
118. Diane’s Pottery Manufacturing Company has two support departments, Maintenance Department and
Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of
$30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are
allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and
$15,000, respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
100
75
600
300
Number of employees
50
100
150
150
Direct labor hours
125
125
500
250
What are the total overhead costs associated with Department X after allocating the Maintenance and Personnel Departments using the direct
method?
119. Diane’s Pottery Manufacturing Company has two support departments, Maintenance Department and
Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of
$30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are
allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and
$15,000, respectively.
Data on standard service hours and number of employees are as follows:
Maint.
Person.
Dept.
Dept.
Dept.
Dept.
X
Y
Standard service hours used
100
75
600
300
Number of employees
50
100
150
150
Direct labor hours
125
125
500
250
What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct
method?
120. Julius Manufacturing prices its products at full cost plus 30 percent. The company operates two support
departments and two producing departments. Budgeted costs and normal activity levels are as follows:
Support Departments
Producing
Departments
A
B
C
D
Overhead costs
$40,000
$100,000
$180,000
$240,000
Square feet
1,000
1,200
2,000
6,000
Number of employees
20
30
60
40
Direct labor hours
–
–
10,000
6,400
Machine hours
–
–
6,000
10,800
Support Department A’s costs are allocated based on square feet, and Support Department B’s costs are allocated based on number of employees.
Department C uses direct labor hours to assign overhead costs to products, while Department D uses machine hours.
One of the products the company produces requires 4 direct labor hours per unit in Department C and no time in Department D. Direct materials for
the product cost $180 per unit, and direct labor is $80 per unit.
If the direct method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be
121. Products with substantial value which are produced simultaneously by the same process up to a split-off
point are called:
122. The cost of crude oil used in producing gasoline products is an example of
123. Joint costs are
124. The split-off point can best be defined as
125. Joint costs are allocated because of
126. A secondary product recovered in the course of manufacturing a primary product during a joint process is
called a:
127. Which of the following is a by-product?
128. Which of the following would generally be a by-product?
129. Which of the following methods allocates joint production costs based on the pounds of product
produced?
130. A joint cost allocation method that would assign the same amount of cost per unit to two joint products that
sell for $10 and $40, respectively, is the
131. Which joint cost allocation method is described by the following statement?
Joint cost is prorated to the products on the basis of each product’s share of units.
132. Laredo Corporation, which manufactures products W, X, Y, and Z through a joint process costing $24,000,
has the following data for 2014:
Total Sales Value
Product
Units Produced
at Split-Off
W
10,000
$5,000
X
6,000
2,500
Y
16,000
3,000
Z
8,000
4,500
What is the amount of joint costs assigned to product W using the physical units method?
133. Restaurant Products produces two products, X and Y, in a single process. In 2011, the joint costs of this
process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing
costs beyond the split-off point were X – $10,000; Y – $20,000. X sells for $10.00 per unit; Y sells for $7.50 per
unit.
What amount of joint costs will be allocated to Product X using the physical units method?
134. Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process
were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced and sold. Separable processing
costs beyond the split-off point were: X – $10,000; Y – $20,000. X sells for $10.00 per unit; Y sells for $7.50
per unit.
What is the gross profit of product Y assuming the physical units method is used?
135. Which joint cost allocation method is described by the following statement?
Each product is assigned a weighting factor which is multiplied by the number of units. Joint cost is prorated to
the products on the basis of each product’s share of total weighted units.
136. Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at
a joint cost of $300,000:
Grade
Board Feet
Final Sales Value
First and second
75,000
$ 56,250
No. 1 common
200,000
180,000
No. 2 common
100,000
105,000
No. 3 common
125,000
127,500
What amount of joint costs will be allocated to first and second using the physical units method?
137. Impacto Corporation produces four products in a joint process for $650,000. The following information is
available on total sales and production in units:
Products
Sales
Production
I
1,000
4,000
L
2,000
5,000
E
3,000
7,000
S
4,000
8,000
What amount of joint costs will be allocated to I based on the physical units method?
138. The sales-value-at-split-off method allocates joint production costs based on each product’s share of