CHAPTER 15 PEARSON QUIZ

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George Brown College Canada *

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ACCT3009

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Apr 3, 2024

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CHAPTER 15 PEARSON QUIZ 1. Which of the following illustrates a purpose for allocating costs to cost objects? A. to defer income and reduce taxes payable B. to provide information for economic decisions C. to determine employee benefit costs D. to evaluate managers and employees E. to reduce competition 2. Deciding whether to make a component part or to purchase it, would be an example of which cost allocation purpose? A. to determine employee's wages B. to measure income and assets for reporting to external parties C. to provide information for economic decisions D. to motivate managers E. to motivate employees 3. The Mississauga Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The accompanying data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies. If a dual-rate cost allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department? A. $24,600 B. $28,500 C. $30,245 D. $29,945 E. $28,200 1

4. The Mississauga Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The accompanying data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies. If a single-rate cost allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs. A. $6,655 B. $6,000 C. $4,800 D. $9,000 E. $8,400 5. The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales, is an example of which criteria for cost allocation decisions? A. fairness and equity B. benefit received C. benefits expended D. ability to bear E. causality 6. Resource consumption accounting (RCA) employs an allocation procedure akin to a dual-rate system. For each cost/resource pool, cost assignment rates for _______. A. fixed and variable costs are based on budgeted quantities B. fixed costs are based on actual quantity, while rates for variable costs are based on budgeted quantities C. fixed costs are based on practical capacity supplied, while rates for variable costs are based on actual quantities D. fixed costs are based on practical capacity supplied, while rates for variable costs are based on budgeted quantities E. fixed and variable costs are based on actual output quantities 2

7. The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. If a single-rate cost allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department? A. $18,000 B. $16,800 C. $14,400 D. $3,600 8. Benefits of the single-rate method include _______. A. fixed costs that are transformed into variable costs for user decision making B. there is a stronger cause and effect relationship C. the low cost of implementation D. information that leads to outsourcing decisions that benefit the organization as a whole E. signals regarding how variable and fixed costs behave differently 9. The method that allocates costs in each cost pool using the same rate per unit is known as the _______. A. dual-rate cost allocation method B. single-rate cost allocation method C. reciprocal cost allocation method D. incremental cost allocation method E. homogeneous cost allocation method 10. The method that allocates each department's budgeted costs to operating departments only is called the _______. A. sequential method B. reciprocal method C. step-down method D. direct method 3

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11. The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs. A. $60,490 B. $59,890 C. $57,000 D. $56,400 12. In a firm's value chain, upstream costs are categorized as ________. A. design costs B. customer service costs C. marketing costs D. distribution costs E. advertising costs 13. General Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What is the allocated cost to the two General Media divisions, respectively, if the single rate is $1,000? Assume that the Cassette and CD Divisions used 1,750 and 200 hours, respectively. Round to the nearest dollar. A. $900,000 and $320,000 B. $2,800,000 and $320,000 C. $900,000 and $200,000 D. $1,750,000 and $200,000 E. $807,692 and $92,308 4

14. Infinity Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used. The fixed and variable costs allocated to the Barbell Department are ________ respectively. A. $50,000 and $75,000 B. $30,000 and $75,000 C. $30,000 and $50,000 D. $50,000 and $60,000 E. $30,000 and $60,000 15. General Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What is the fixed cost per year and the variable cost per hour, respectively, for the General Media Cassette Division using the dual-rate method, assuming that the allocation bases are capacity for fixed costs and budgeted capacity for variable costs? Round to the nearest dollar. A. $760,000 and $400 B. $765,958 and $400 C. $765,958 and $360 D. $900,000 and $400 E. $720,000 and $360 16. Which cost allocation method differentiates between variable and fixed costs? A. heterogeneous method B. single-rate method C. fixed rate method D. variable method E. dual-rate method 5

17. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. What is the cost allocated from the Maintenance Department to Department A using the step-down method if the Personnel Department is allocated first? Round to the nearest dollar. A. $14,118 B. $12,000 C. $48,706 D. $48,000 E. $5,000 18. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. How much of the cost of the Personnel Department is allocated to Department B using the direct method? Round to the nearest dollar. A. $15,000 B. $5,000 C. $60,000 D. $8,000 E. $12,632 6

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19. General Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What is the allocated cost to the two General Media divisions, respectively, if budgeted usage is the base for fixed costs and actual usage is the base for variable costs? (Use the dual-rate method.) Assume that the Cassette and CD Divisions used 1,750 and 200 hours, respectively. Round to the nearest dollar. A. $1,050,000; $120,000 B. $1,787,240; $204,256 C. $2,000,126; $294,112 D. $1,787,240; $254,043 E. $1,508,511; $221,489 20. The owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The following data from operations were collected for analysis. What is the Capping Department's total cost if both service departments are allocated using the complete reciprocated cost method and their costs for the year were $375,000 for Plant Maintenance and $100,000 for Data Processing? Round to the nearest dollar. A. $196,898 B. $321,898 C. $412,766 D. $184,132 E. $191,053 7

21. The Mississauga Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The accompanying data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies. If a single-rate cost allocation method is used, what amount of copying facility costs will be budgeted for the Marketing Department? A. $7,200 B. $28,500 C. $9,000 D. $24,600 E. $1,800 22. Which of the following does NOT apply to support departments? A. A support department is an operating department. B. To obtain accurate product costs requires the inclusion of support department costs. C. Direct support costs are always traced, indirect support department costs are allocated. D. Support departments create special accounting problems when they provide reciprocal support to each other. E. An example of a support department would be a personnel department. 23. A disadvantage of allocating fixed costs using a budgeted rate and actual usage is that _______. A. changes in one department's usage should not affect another department's allocation B. the allocation would capture the cause-and-effect relationship C. variation in usage will result in variances that need to be managed D. some organizations offer rewards to managers who make accurate forecasts E. supplying division managers may be tempted underestimate usage when budgeting unit costs 8

24. The costs of unused capacity are highlighted when _______. A. budgeted usage allocations are used B. the dual-rate cost allocation method allocates fixed costs based on actual usage C. practical capacity based allocations are used D. actual usage based allocations are used E. variable cost variances are evaluated 25. Infinity Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used. The fixed and variable costs allocated to the Sauna Department are ________ respectively. A. $30,000 and $60,000 B. $30,000 and $75,000 C. $50,000 and $75,000 D. $50,000 and $60,000 E. $30,000 and $50,000 26. Benefits of the dual-rate method include _______. A. increased costs of implementation B. information that leads to outsourcing decisions that benefit the organization as a whole C. variable costs that are transformed into fixed costs for user decision making D. avoidance of expensive analysis for categorizing costs as either fixed or variable E. the low cost of implementation 27. Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services? A. to motivate managers and other employees B. to measure income and assets for reporting to external parties C. to justify costs D. to provide information for economic decisions E. to compute reimbursement 9

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28. The owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The following data from operations were collected for analysis. What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing? Round to the nearest dollar. A. $112,275 and $74,468 B. $337,500 and $200,000 C. $131,250 and $84,375 D. $337,500 and $12,500 E. $281,250 and $12,500 29. Which of the following is TRUE concerning cost allocation in a multi-product company? A. When the indirect costs are fixed and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base. B. When the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base. C. When the indirect costs are fixed and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base. D. When the indirect costs are fixed and the products are produced jointly, it is possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred. E. When the indirect costs are variable and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base. 10

30. To discourage unnecessary use of a support department, management might A. allocate a fixed amount of support department costs to each department regardless of use. B. issue memos on useful services provided by the support department. C. allocate support department costs based upon user department usage. D. allocate only variable costs based on budgeted usage. E. not allocate any support department costs to user departments. 31. Under which of the following methods of cost allocation is there no distinction between fixed and variable costs? A. fixed method B. homogeneous method C. dual-rate method D. standard cost method E. single-rate method 32. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. What is the cost of the Maintenance Department allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first? Round to the nearest dollar. A. $16,000 B. $12,800 C. $48,000 D. $21,333 E. $32,000 11

33. The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. If a single-rate cost allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs. A. $9,600 B. $18,000 C. $16,800 D. $12,000 34. Infinity Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used. Assuming that that fixed and variable costs are allocated according to capacity used, the fixed and variable costs allocated to the Sauna Department will be ________, respectively A. $30,000 and $60,000 B. $40,000 and $60,000 C. $60,000 and $40,000 D. $30,000 and $75,000 E. $30,000 and $50,000 35. For the economic decision purpose: A. period costs are not allocated. B. costing is only related to product pricing. C. the costs in all six business functions should be included. D. costs for only one function is included. E. only inventoriable costs under ASPE/IFRS should be included 12

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36. The Mississauga Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The accompanying data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 40,000 copies and by the Operations Department was 180,000 copies. If a dual-rate cost allocation method is used, what amount of copying facility costs will be allocated to the Operations Department? Assume budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate variable copying costs. A. $30,245 B. $29,945 C. $28,500 D. $24,600 E. $28,200 37. Data Source Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What is the total cost per hour of use for the CD Division assuming the budgeted rate is used for variable costs and practical capacity is the allocation base for fixed costs? Round to the nearest cent. A. $360.00 B. $315.79 C. $924.00 D. $1,040.00 E. $1,050.00 38. Fixed cost allocation rates should be determined using _______. A. short-term expected usage B. past production capacity C. long-term expected usage D. actual usage E. short-term average usage 13

39. The owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The accompanying data from operations were collected for analysis. Which of the following linear equations would represent the complete reciprocated cost of the Data Processing department? A. DP = $75,000 + (3,500 + 16,700)PM B. PM=$75,000x(600 + 4,700) + $350,000 x (3,340 + 16,700) C. DP=$75,000x(600 + 4,800) + $350,000 x (3,340 + 16,700) D. DP= $75,000 + (600+ 4,700)PM E. PM=$350,000 + (600 + 16,700)DP 40. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. How much of the cost of the Maintenance Department is allocated to Department B using the direct method? A. $16,000 B. $12,800 C. $32,000 D. $60,000 E. $24,000 14

41. The owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The accompanying data from operations were collected for analysis. What is the complete reciprocated cost of the Data Processing and the Plant Maintenance, respectively? Round to the nearest dollar. A. $122,971 and $375,773 B. $118,750 and $365,000 C. $152,432 and $375,773 D. $152,432 and $369,459 E. $90,000 and $393,750 42. General Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What are the fixed cost per year and the variable cost per hour for the General Media CD Division if the dual-rate method is used? Assume that the allocation bases are budgeted usage for fixed costs and for variable costs. Round to the nearest dollar. A. $134,043 and $480 B. $100,270 and $480 C. $126,000 and $400 D. $900,000 and $400 E. $141,489 and $400 15

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43. The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year. Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Department? A. $60,490 B. $59,890 C. $57,000 D. $56,400 44. In a firm's value chain, downstream costs are categorized as ________. A. manufacturing quality control costs B. research and development costs C. customer service costs D. design costs E. production costs 45. Data Source Media manufactures cassettes and CDs in separate divisions utilizing one plant location. The following data have been prepared for review. What is the total cost per hour of use for the Cassette Division assuming budgeted usage is the allocation base and a single-rate method is used? Round to the nearest cent. A. $360.00 B. $382.98 C. $1,050.00 D. $600.00 E. $1,068.09 16

46. Which of the following methods of allocating support department costs is both simple and intuitive? A. hybrid method B. linear equation method C. direct allocation method D. reciprocal method E. step-down method 47. Consider the following information attributed to the material management department: The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments. Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month, what would the allocation rate be and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round to the nearest dollar.) A. $36 an hour for a total of $18,000 B. $36 an hour for a total of $40,000 C. $560 an hour for a total of $80 D. $80 an hour for a total of $40,000 48. Infinity Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used. Assuming that fixed and variable costs are allocated according to capacity used, the fixed and variable costs allocated to the Barbell Department will be ________, respectively. A. $30,000 and $50,000 B. $40,000 and $60,000 C. $60,000 and $40,000 D. $30,000 and $75,000 E. $30,000 and $60,000 17

49. An advantage to using budgeted usage, rather than actual usage, for the allocation base is that _______. A. ASPE/IFRS requires it for comparability to previous years B. it is consistent with a short-run time horizon C. management does not have to be accountable for actual costs since the system only deals with budgeted costs D. variable costs are lower E. user divisions will know their allocated costs in advance 50. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. What is the cost of the support departments allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first? Round to the nearest dollar. A. $46,588 B. $21,333 C. $53,412 D. $56,313 E. $43,660 51. Which of the following is the first step in the cost-allocation decision process? A. Calculate the cost-allocation rate for each indirect cost pool. B. Analyze the alternatives and select the best one for the denominator. C. Identify the relevant indirect costs included in the cost pool(s) or numerator(s). D. Identify the purpose of the cost allocation. E. Identify the direct inputs that are already measured. 18

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52. When choosing between using budgeted rates, and actual rates, which of the following is TRUE? A. Actual rates let users know in advance what their costs are. B. When budgeted rates are used, users must wait till the end of the budget period to know what their costs are. C. With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances. D. Budgeted rates based on user department estimates may lead to outsourcing needed work, rather than relying on an internal support department. E. Budgeted rates may help the manager of a support department to improve efficiency. 53. Which of the following criteria subsidizes poor performers at the expense of the best performers? A. benefits expended B. benefit received C. fairness and equity D. causality E. ability to bear 54. Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows. What is the cost of the support departments allocated to Department A using the step-down method if the Personnel Department is allocated first? Round to the nearest dollar. A. $53,412 B. $56,313 C. $43,660 D. $46,588 E. $46,640 19