CHAPTER 15 QUIZ
1. The use of a dual-rate cost-allocation method recognizes
a. the improvements in technology allowing for use of multiple cost pools.
b. the need to use both budgeted and actual cost rates when allocating.
c. the need to use both budgeted and actual usage of quantities when allocating.
d. the behavior aspect of costs.
2. Managers are affected by risks they have to take and would prefer to use
a. actual rates for cost allocation because the rates are calculated from real amounts.
b. actual rates for cost allocation because actual rates are easier to justify to users.
c. budgeted rates for cost allocation because the rates are known in advance.
d. budgeted rates for cost allocation because any variances are transferred to users.
The following data apply to questions 3 through 5.
Billy Stone, Inc. budgets the following amounts for its Buildings & Grounds and
Computer Services Departments in servicing each other and the two manufacturing
divisions of Signs and Mailers:
Used By
Supplied By Building & Grounds Computer Services Signs Mailers
Buildings & Grounds — 0.20 0.60 0.20
Computer Services 0.15 — 0.30 0.55
The actual results for the time period were as follows:
Used By
Supplied By Building & Grounds Computer Services Signs Mailers
Buildings & Grounds — 0.10 0.60 0.30
Computer Services 0.25 — 0.35 0.40
Actual cost data for each department are:
Fixed Variable
Buildings & Grounds $ 50,000 $90,000
Computer Services $100,000 $21,000
3. Total fixed costs allocated from Buildings & Grounds to the Signs Department, using
the preferred allocation basis, by the direct allocation method are
a. $37,500.
b. $33,333.
c. $30,000.
d. $25,000.
4. Total variable costs allocated from Computer Services to Mailers Department, using the
preferred allocation basis, by the step-down allocation method (begin with Building &
Grounds) are
a. $8,400.
b. $12,000.
c. $16,000.
d. $25,235.
5. The equation to determine the total variable costs of Computer Services using the
preferred allocation basis for the reciprocal allocation method is
a. CS = $21,000 + 0.25 B&G.
b. CS = $21,000 + 0.20 B&G.
c. CS = $21,000 + 0.15 B&G.
d. CS = $21,000 + 0.10 B&G.
6. If a cost is incurred for more than one user, that cost is considered a(n)
a. homogeneous cost.
b. common cost.
c. stand-alone cost.
d. incremental cost.
7. Which of the following is often the most basic cause of contract disputes?
a. Allowable costs
b. Cost-allocation issues
c. Use of common costs
d. Writing into the contract “rules of the game”
8. Bundling of products creates the need for revenue allocation for each of the following
except when
a. selling prices for the bundle are set to recoup the stand-alone prices of each product in
the bundle.
b. the manager is responsible for profitability on a product-by-product basis.
c. the manager’s bonus is based upon product profitability.
d. persons involved with product development are compensated by percentage of revenues
realized.
Use the following information for questions 9 and 10.
Trio Company sells three products, Do, Ra, and Mi, for prices of $8, $7, and $5,
respectively. They also offer combinations of the products for reduced overall prices. The
following packages are available: (1) a package containing Do and Ra sells for $13.50, (2)
a package of Do and Mi sells for $11.50, (3) a package containing Ra and Mi sells for
$10.50, and (4) a package of all three products, Do, Ra, and Mi, sells for $17.00.
9. If Trio Company uses the stand-alone method (based on selling prices) to allocate
revenues to products, the amount of revenues to be allocated to Do from a package of all
three products, as described in (4) above, sold would be
a. $8.00.
b. $6.80.
c. $5.95.
d. $4.25.
10. If Trio Company uses the incremental-revenues allocation method and has designated
Ra as the primary product, the amount of revenues from a bundled package of all three
products to be allocated to Ra would be
a. $7.00.
b. $6.80.
c. $5.95.
d. $4.25.
CHAPTER 15 QUIZ SOLUTIONS
