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Exam 7: Allocating Costs of Support Departments and Joint Products

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Question 71

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Kraft, 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: 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

A) $45,000.
B) $40,000.
C) $36,400.
D) $36,000.

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Question 72

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Kraft, 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: 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 product costing, support department costs allocated to Department X are

A) $20,000.
B) $20,400.
C) $24,800.
D) $30,000.

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Question 73

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Figure 7-6 Oaks 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: -Refer to Figure 7-6.What is the combined total department costs for the producing departments after allocation of the support departments?

Which joint cost allocation method is described by the following statement? Overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage.Each product is then assigned the same cost of goods sold percentage.

Examples of support departments include all of the following EXCEPT

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?

Which of the following methods allocates a joint cost such that each product has the same cost of goods sold percentage?

Gray Enterprises has two support departments (S1 and S2) and two producing departments (A and B).The distribution of services by the support departments is as follows: Total department costs for the support and producing departments are as follows: Required: Find the amount of total costs for A and B using the reciprocal method.

Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?

The following information pertains to Yoder Corporation: Yoder 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

Figure 7-7 Eden Company manufactures two products, Brights and Dulls, from a joint process.A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls.Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls.The market price is $250 for Brights and $200 for Dulls. - Refer to Figure 7-7.What is the amount of joint costs allocated to Dulls using the constant gross margin percentage method?

Which of the following allocation methods fully recognizes services that support departments provide to each other?

Lopez 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 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

What is one of the potential disadvantages of NOT allocating support departments to production departments?

Which of the following allocation methods assumes "step-down" interdepartmental services?

Rust 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?

Newton 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: -What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?

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.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?

Bond Corporation, which manufactures Products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2011: What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?

Otto Inc.began the current period with no inventories.During the period, it processed 50,000 pounds of materials costing $450,000.Conversion costs incurred during the period amounted to $660,000.The firm ended the period with no work-in-process.During the period, the firm produced 16,000, 24,000, and 10,000 units of X, Y, and Z, respectively.All costs are considered joint costs.The firm sold 12,000 units of X, 16,000 units of Y, and 9,000 units of Z.X sells for $30 per unit, Y for $44 per unit, and Z for $4 per unit.The firm uses the net realizable value method for cost allocation.Z is considered a by-product. Required: