Question

Which of the following is the main feature of support department costs?

a.They are direct costs.

b.They are office supply costs.

c.They are associated with sales commissions.

d.They are indirect costs.

Which of the following describes how support department costs are related to production?

a.They are a part of direct materials cost.

b.They are a part of the both direct labor and direct materials costs.

c.They are indirectly related to production.

d.They are a part of direct labor cost.

Using the reciprocal services method, which of the following equations represents the correct algebraic expression to determine Janitorial Department costs when the total costs of the Janitorial Department (J) include not only $500,000 of direct costs but also 25% of the Maintenance Department (M) cost and the Maintenance Department includes not only $450,000 of direct costs but also 30% of the Janitorial Department? (Hint: This equation is derived from the two separate equations representing each department's costs.)

a.J = $500,000 + [(0.25 ÷ $450,000) + (0.30 ÷ J)]

b.J = ($500,000 × 0.25) + [($450,000 × 0.20) + J]

c.J = $500,000 + {0.25 × [$450,000 + (0.20 × J)]}

d.J = $500,000 – (0.25 × $450,000) – (0.20 × J)

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 cream? Round percentage calculations to the nearest whole percent.

a.$1,000

b.$560

c.$0

d.$440

Miller Safety Equipment uses multiple production department rates to apply overhead to products. The company will allocate support department costs to production departments based on the amount of support activity

a.used by the department

b.used by the department in the prior month

c.used by the entire production facility

d.budgeted by the department

Which of the following is a drawback in using a single plantwide rate to apply overhead to product costs?

a.Support department costs are not combined with all other overhead costs.

b.Too much emphasis is placed on the fact that manufacturing processes differ from one product to another.

c.Some overhead costs are missing from the application process.

d.A single driver is used for all overhead costs and it is unlikely that the driver selected is appropriate for every type of overhead.

Which of the following terms is commonly used to describe the departments within a company that provide a necessary service to produce a product but are not directly involved in production?

a.costing departments

b.support departments

c.investment center departments

d.expense departments

Which of the following statements is true?

a.Support department cost allocations should be incorporated into a product costing system.

b.Support department cost allocations can be ignored for more accurate product costing.

c.Support department cost allocations should be incorporated into the general accounting system but do not need to be incorporated into a product costing system.

d.Support department cost allocations should be rolled into the general and administrative costs associated with the corporate office expenses.

Which of the following statements is true?

a.Support department cost allocations should be incorporated into a product costing system.

b.Support department cost allocations can be ignored for more accurate product costing.

c.Support department cost allocations should be incorporated into the general accounting system but do not need to be incorporated into a product costing system.

d.Support department cost allocations should be rolled into the general and administrative costs associated with the corporate office expenses.

Which of the following statements is true about the sequential method of allocating support department costs to production departments?

a.The sequential method captures some but not all the inter-support-department services by allocating support departments to other support departments and production departments in a series of steps.

b.The sequential method is less accurate than the direct method.

c.The sequential method is also known as the step-up method.

d.The sequential method requires that the same cost driver be used for each support department.

Answer 1