3. A corporation allocates indirect corporate overhead costs to its operating divisions. The company uses a cause-and-effect criterion in the selection of appropriate allocation bases. Which of the following would be an appropriate allocation base to assign the costs of the corporate personnel department to the operating divisions using a cause-and-effect criterion? A) Number of employees in each division B) Square footage of space occupied by each division C) Total service years of employees in each division D) Total book value of identifiable division assets

3. A corporation allocates indirect corporate overhead costs to its operating divisions. The company uses a cause-and-effect criterion in the selection of appropriate allocation bases. Which of the following would be an appropriate allocation base to assign the costs of the corporate personnel department to the operating divisions using a cause-and-effect criterion? A) Number of employees in each division B) Square footage of space occupied by each division C) Total service years of employees in each division D) Total book value of identifiable division assets

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT HR Publishing Binding IT tickets 0 1,500 2,400 2,100 Employees 16 0 24 40 Department direct costs $ 150,000 $ 247,500 $ 430,000 $ 390,000 Required: Use the step method to allocate the service costs, using the following:The order of allocation starts with IT.Note: Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations. Costs Allocated To: Costs Allocated To: Costs Allocated To: Costs Allocated To: From: IT HR Pubishing Binding Service department costs IT HR Total Costs $ $ $ $
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Part 1: Allocate the costs of the 3 service departments using the direct method. Part 2: Allocate the costs of the 3 service departments using the step method, with the order determined by the greater percentage usage. Part 3: Allocate the costs of the 3 service departments using the reciprical method. Part 4:What is one strength and one drawback of each of the methods?
determine if a profit center manager of a division of a picture frame manufacturer had control over each of the following costs and expenses: 1. cost of materials used for the division's production development 2. sales goals for the divisions top selling product 3. cost of employees hourly wage in the department answers- a. yes yes yes b. yes no yes c. no no yes d. yes yes no e. no yes no f. no no no
Required Information Bentler Industries provides high-technology navigation and communication equipment for the aerospace and shipbuilding industries. It is organized into two divisions, Aeronautics and Marine. The division presidents are given wide decision- making authority that covers operations, marketing, and asset acquisition and disposal. Bentler evaluates the division presidents on, among other things, ROI in their respective divisions. ROI is based on after-tax divisional income and beginning-of-year assets. Divisional income includes allocated corporate overhead. For the most recent year (year 3), data from the two divisions shows the following: Marine Division Aeronautics Division Cost of sales Sales Allocated corporate overhead ($000) Other general and administrative costs R&D costs Total assets (January 1,Year 3) $ 16,700 $ 17,500 22,900 15,300 1,170 2,950 20,100 7,500 63,800 60,000 28,300 56,550 The tax rate applied at Bentler is 20 percent. Looking at the ROI results for…