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Exam 19: Support Department and Joint Cost Allocation

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Question 51

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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)

E) All of the above
F) A) and D)

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Question 52

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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

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Question 53

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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 -Production Data Entry Department-records data such as raw material usage for each production line

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 skimmed milk? Round percentage calculations to the nearest whole percent.

Support departments are normally accounted for as an investment center.

Match each description below to the appropriate term (a-c). -Transferring overhead costs to support and production departments A)Allocate B)Distribute C)Apply

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: The percentage (proportional) usage of the Janitorial Department by the Cutting Department is

A key aspect to the multiple production department rate method for overhead application is

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?

The direct method of allocating support department costs to production using the ABC method is the easiest and least accurate.

Match each description below to the appropriate term (a-c). -Transferring costs to products A)Allocate B)Distribute C)Apply

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 -Scenario 3: Cooper Industries has a plant in Pennsylvania that manufactures one product in one department with 15 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.

Because support department costs are indirectly related to production, they are applied to products as part of overhead.

The net realizable method of allocating joint costs is most suitable for processes where

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.

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

Match each description below to the appropriate method for allocating costs (a-c). -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. A)Single plantwide overhead rate B)Multiple production department rates C)Activity-based costing

Under the direct method of allocating support department costs to production departments using ABC, all support department costs are allocated directly to production departments.

Which of the following statements explains the major difference between the sequential method and the reciprocal services method?

Support departments are sometimes called service departments because they provide services to other departments.