Cornerstones of Cost Management 2nd Edition By Don R. Hansen A+

Description

1. A process is a series of activities or operations, which are linked to perform a specific objective.
   True False

1. The cost flows for a process-costing system are totally different from those of a job order costing system.
   True False

1. Process systems are characterized by a larger number of homogeneous products passing through a series of processes.
   True False

1. The production report is the document that summarizes the manufacturing activity that takes place in a work-in-process department.
   True False

1. Many service organizations and just-in-time (JIT) manufacturing firms operate in an environment without work-in-process inventories.
   True False

1. Services that are basically homogeneous and repetitive cannot take advantage of a process-costing approach.
   True False

1. In JIT manufacturing, work cells are created that produce a product from start to finish.
   True False

1. In firms with ending work-in-process inventories, output is measured using equivalent units.
   True False

1. Equivalent units are the incomplete units that could have been produced given the total amount of effort expended.
   True False

1. In a process-costing system, work-in-process inventory, materials are added uniformly so that multiple calculations of equivalent units are needed for each type of input.
   True False

1. The FIFO costing method recognizes that the work and costs carried over from the prior period legitimately belong to that period.
   True False

1. FIFO follows the job-order costing principle.
   True False

1. The FIFO method unit costs are used to value output that is related to future periods.
   True False

1. The weighted average method treats the equivalent output and costs in beginning work-in-process inventories as if they belong to the current period when calculating unit cost.
   True False

1. In a process-costing system, the costing of goods transferred out in BWIP inventory is difficult because there are multiple categories of completed units.
   True False

1. The major benefit of the weighted average method is simplicity. The major disadvantage is that accuracy and performance measurements are impaired.
   True False

1. Transferred-in goods, must be converted to the units of measure used by the current department.
   True False

1. For the receiving department of a process-costing manufacturer, transferred-in goods are materials that are added at the end of the process.
   True False

1. In calculating equivalent units of production using the weighted average method, the transferred-in goods are treated as materials added at the beginning of the process.
   True False

1. When manufacturing companies exhibit characteristics of both job and process environments, they use batch production processes.
   True False

1. Operation costing uses a blend of job-order and process-costing procedures whenever batches of dissimilar products are produced.
   True False

1. In operation costing, job-order procedures are used to assign direct materials costs and process procedures are used to assign conversion costs.
   True False

1. When spoilage is assumed to be normal, it is not tracked separately, it is simply included in the total cost of good units.
   True False

1. Spoilage in a process costing process means that more units enter the process than leave it.
   True False

1. Abnormal spoilage costs are treated the same as normal spoilage for process costing.
   True False

1. The accounting system which accumulates production costs by process and uses a work-in-process account for each process is called __________ .
   ________________________________________

1. The basic characteristics of process costing include: cost flows, journal entries, and
   the __________ report.
   ________________________________________

1. A key input to the cost of production report is __________ costs.
   ________________________________________

1. Companies using JIT manufacturing do not use __________ inventories for their process costing.
   ________________________________________

1. In a __________ costing system, production costs are accumulated by process.
   ________________________________________

1. In process costing, __________ costing can be used to assign shared overhead to processes.
   ________________________________________

1. The units that could have been produced in a period given the amount of manufacturing inputs used are called __________ .
   ________________________________________

1. The process that determines the equality of the costs in beginning work in process and the costs incurred during the period is called __________ .
   ________________________________________

1. When materials are not added uniformly using a work-in-process system, __________ of equivalent units are needed, one for each type of input.
   ________________________________________

1. The unit-costing method that excludes prior-period work and costs in computing current-period unit work and costs is called the __________ costing method.
   ________________________________________

1. FIFO follows the __________ principle.
   ________________________________________

1. For beginning work-in-process category using FIFO, the manufacturing cost is the sum of the current-period __________ and the current __________ to complete the BWIP.
   ________________________________________

1. The __________ method is a unit-costing method that merges prior-period work and costs with current period work and costs.
   ________________________________________

1. The weighted average costing method picks up __________ inventory costs and outputs and treats them as if they belong in the current period.
   ________________________________________

1. Using the weighted average costing method, the costing of goods transferred out is __________ since there is only one category of completed units.
   ________________________________________

1. The cost assigned to goods from a prior process is called the __________ cost.
   ________________________________________

1. For the receiving department, transferred in goods are added at the __________ of the process.
   ________________________________________

1. The usual approach in process manufacturing is to treat transferred-in goods as a separate material category when calculating __________ .
   ________________________________________

1. The costing system that uses job-order procedures to assign direct material costs to batches and process procedures to assign conversion costs is called __________ costing.
   ________________________________________

1. In operation costing, the process which produces batches of different products which are identical in many ways but differ in others is called __________ process
   ________________________________________

1. The documents used to collect production costs for each batch in operation costing are called __________ .
   ________________________________________

1. Manufacturing firms that have characteristics of both job and process environments often use __________ processes.
   ________________________________________

1. __________ is a costing system that blends job-order and process-costing procedures applied to batches of homogeneous products.
   ________________________________________

1. When spoilage is assumed to be __________ it is embedded in the total cost of good units.
   ________________________________________

1. When spoilage is due to the exacting nature of a particular job it is called __________ spoilage.
   ________________________________________

1. What system would a manufacturer of unique special orders or batch processes most likely use to accumulate costs?
   A. contract costing
   B. variable costing
   C. process costing
   D. job-order costing

1. In process costing, costs are accounted for by
   A. job.
   B. batch.
   C. process.
   D. year.

1. The appropriate cost accounting system to use when inventory items are produced on an assembly line is
   A. weighted average.
   B. job-order costing.
   C. process costing.
   D. perpetual method.

1. The process that accumulates production costs by process and uses a work-in-process account for each process is called:
   A. Process costing
   B. Joint costing
   C. Variable costing
   D. Job-order costing

1. Figure 6-1The Sinbad Company has the following information for the Assembly Department for October 2014:

Materials purchased	$ 45,000
Materials used	49,000
Direct labor	30,000
Actual manufacturing overhead	56,000
Cost of goods completed and transferred to the Finishing Dept.	125,000

Overhead rate is 200 percent of direct labor costs.

Allen Company uses a process costing system for the Assembly Department.

Refer to Figure 6-1. The journal entry to record materials purchased would include a
A. debit to Materials Inventory for $45,000.
B. debit to Materials Inventory for $49,000.
C. credit to Accounts Payable for $49,000.
D. both b and c.

1. Figure 6-1The Sinbad Company has the following information for the Assembly Department for October 2014:

Materials purchased	$ 45,000
Materials used	49,000
Direct labor	30,000
Actual manufacturing overhead	56,000
Cost of goods completed and transferred to the Finishing Dept.	125,000

Overhead rate is 200 percent of direct labor costs.

Allen Company uses a process costing system for the Assembly Department.

Refer to Figure 6-1. What is the total amount of debits to Work in Process-Assembly Department for October?
A. $125,000
B. $131,000
C. $139,000
D. $109,000

1. Figure 6-1The Sinbad Company has the following information for the Assembly Department for October 2014:

Materials purchased	$ 45,000
Materials used	49,000
Direct labor	30,000
Actual manufacturing overhead	56,000
Cost of goods completed and transferred to the Finishing Dept.	125,000

Overhead rate is 200 percent of direct labor costs.

Allen Company uses a process costing system for the Assembly Department.

Refer to Figure 6-1. The journal entry to record goods completed and transferred out of the Assembly Department would include a
A. debit to Finished Goods Inventory for $125,000.
B. credit to Materials Inventory for $125,000.
C. debit to Work in Process-Assembly Department for $125,000.
D. debit to Work in Process-Finishing Department for $125,000.

1. When products and their costs are moved from one process to the next process, these costs are referred to as
   A. unit costs.
   B. transferred-in costs.
   C. WIP inventory costs.
   D. equivalent unit costs.

1. Which is NOT a difference between the job-order costing system and the process costing system?
   A. They accumulate their costs to different cost objectives.
   B. The number of work-in-process accounts is different.
   C. One does not use the finished goods account.
   D. all of the above.

1. Figure 6-2Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April:

	Cutting	Assembly	Finishing
direct materials	$7,000	$10,000	$3,000
direct labor	3,000	14,000	2,000
applied overhead	4,000	5,000	6,000

There were no work in process inventories and 1,000 podiums were produced.

Refer to Figure 6-2. What is the cost transferred out of the assembly department.
A. $43,000
B. $54,000
C. $29,000
D. $14,000
E. none of the above

1. Figure 6-2Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April:

	Cutting	Assembly	Finishing
direct materials	$7,000	$10,000	$3,000
direct labor	3,000	14,000	2,000
applied overhead	4,000	5,000	6,000

There were no work in process inventories and 1,000 podiums were produced.

Refer to Figure 6-2. Record the journal entries to record the transfer of goods from process to process.
A. Work in Process – Assembly 14,000
Work in Process – Cutting 14,000
Work in Process – Finishing 43,000
Work in Process – Assembly 43,000
Finished Goods 54,000
Work in Process – Finishing 54,000
B. Work in Process – Assembly 29,000
Work in Process – Cutting 29,000
Work in Process – Finishing 11,000
Work in Process – Assembly 11,000
Finished Goods 54,000
Work in Process – Finishing 54,000
C. Work in Process – Cutting 14,000
Raw Materials 14,000
Work in Process – Assembly 29,000
Raw materials 29,000
Work in Process – Finishing 11,000
Raw Materials 11,000
D. none of the above

1. Figure 6-2Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April:

	Cutting	Assembly	Finishing
direct materials	$7,000	$10,000	$3,000
direct labor	3,000	14,000	2,000
applied overhead	4,000	5,000	6,000

There were no work in process inventories and 1,000 podiums were produced.

Refer to Figure 6-2. The journal entry to assign costs to the Assembly process would be
A. Raw Materials 10,000
Payroll 14,000
Overhead Control 5,000
Work in Process – Assembly 29,000
B. Raw Materials 20,000
Payroll 19,000
Overhead Control 15,000
Work in Process – Assembly 54,000
C. Work in Process – Assembly 29,000
Raw Materials 10,000
Payroll 14,000
Overhead Control 5,000
D. Work in Process – Assembly 54,000
Raw Materials 20,000
Payroll 19,000
Overhead Control 15,000
E. none of the above

1. In a process costing system, which of the following would be TRUE?
   A. There is no need to use time tickets to assign costs to processes.
   B. There is no need to track materials to processes.
   C. A process costing system is more expensive to maintain because it has more work-in-process accounts.
   D. all of the above are true.

1. As production occurs, materials, direct labor, and applied manufacturing overhead are recorded in
   A. cost of goods sold.
   B. work in process.
   C. materials.
   D. finished goods.

1. Which is TRUE about services?
   A. Some services may require that a sequence of uniform processes be performed.
   B. Services can never be homogeneous and repetitively produced.
   C. Services cannot have work-in-process inventories.
   D. All services require job-order costing.

1. Which is NOT a feature of a process costing system?
   A. Standardized products pass through standardized processes.
   B. Each unit is treated uniquely in receiving a process.
   C. Manufacturing costs are accumulated by a process for a given time period.
   D. Unit costs are calculated for each department.

1. Figure 6-3Jamie Hopen, CPA, prepares tax returns. The production costs and the number of tax returns prepared for the month of September are as follows:

Direct materials	$ 200
CPA staff salaries	4,000
Overhead	1,800
Total	$6,000

Number of tax returns 300

What is the unit cost per tax return?
A. $0.67
B. $15.00
C. $20.00
D. $3.33

1. Figure 6-3Jamie Hopen, CPA, prepares tax returns. The production costs and the number of tax returns prepared for the month of September are as follows:

Direct materials	$ 200
CPA staff salaries	4,000
Overhead	1,800
Total	$6,000

Number of tax returns 300

Refer to Figure 6-3. What is the cost of services sold?
A. $1,800
B. $4,000
C. $200
D. $6,000

1. In order to determine product costs, JIT firms are usually structured so they can use:
   A. job-order costing
   B. process costing
   C. joint costing
   D. variable costing

1. JIT manufacturing emphasizes
   A. continuous improvement.
   B. elimination of waste.
   C. reduction of work-in-process inventories.
   D. all of the above.

1. Activity-based costing might have a role in process costing settings under what conditions?
   A. under no conditions
   B. when there are products produced with homogeneous processes and little diversity
   C. when multiple products are being produced.
   D. when only one product is being produced

1. The whole units that could have been produced in a period given the amount of manufacturing inputs used is(are) called:
   A. FIFO costing
   B. Transferred-in cost
   C. Weighted average cost
   D. Equivalent units of output

1. That which determine(s) whether the costs assigned to units transferred out and to units in ending work in process are equal to the costs in beginning work in process, plus the manufacturing costs incurred in the current period is(are) called:
   A. Equivalent unit of output
   B. Cost reconciliation
   C. Batch production process
   D. Transferred-in costs

1. Equivalent units expresses all activity of the period in terms of
   A. direct labor hours.
   B. partially completed units.
   C. fully completed units.
   D. units of input.

1. The term given to units that represents the number of completed units that is equal, in terms of production inputs, to a given number of partially completed units is:
   A. Units completed
   B. Equivalent units
   C. Units started and completed
   D. Total units in production

1. Figure 6-4The following information is available from the records of Diamond Cut, Inc.:

Direct Materials-Assembly Department	$10,000
Direct Materials-Finishing Department	15,000
Direct Labor-Assembly Department	11,000
Direct Labor-Finishing Department	20,000
Applied Overhead-Assembly Department	11,000
Applied Overhead-Finishing Department	20,000
Actual Overhead-Assembly Department	12,500
Actual Overhead-Finishing Department	17,500

Refer to Figure 6-4. What are the “total costs to account for” in the Assembly Department?
A. $32,000
B. $44,500
C. $21,000
D. $10,000

1. Figure 6-4The following information is available from the records of Diamond Cut, Inc.:

Direct Materials-Assembly Department	$10,000
Direct Materials-Finishing Department	15,000
Direct Labor-Assembly Department	11,000
Direct Labor-Finishing Department	20,000
Applied Overhead-Assembly Department	11,000
Applied Overhead-Finishing Department	20,000
Actual Overhead-Assembly Department	12,500
Actual Overhead-Finishing Department	17,500

Refer to Figure 6-4. What are the conversion costs in the Finishing Department?
A. $35,000
B. $37,500
C. $40,000
D. $57,500

1. When conversion costs are uniform,
   A. materials, labor, and overhead are applied at different rates throughout the process.
   B. materials, labor, and overhead are added throughout the process at the same rate.
   C. labor and overhead are added at the same rate but different materials are added at a different point.
   D. materials and labor are added at the same rate but overhead is applied uniformly.

1. Figure 6-5Maynard Inc. manufactures desks. The following data was given for production in February:

	units, beginning work in process	0
	units started	200
	units completed	?
	units, ending work in process (40% complete)	50

Refer to figure 6-5. What were the total number of units to account for?
A. 50
B. 150
C. 200
D. 400
E. none of the above

1. Figure 6-5Maynard Inc. manufactures desks. The following data was given for production in February:

	units, beginning work in process	0
	units started	200
	units completed	?
	units, ending work in process (40% complete)	50

Refer to Figure 6-5. How many units were completed?
A. 400
B. 200
C. 150
D. 50
E. none of the above

1. Figure 6-5Maynard Inc. manufactures desks. The following data was given for production in February:

	units, beginning work in process	0
	units started	200
	units completed	?
	units, ending work in process (40% complete)	50

Refer to Figure 6-5. What are the equivalent units?
A. 200
B. 170
C. 180
D. 150
E. none of the above

1. Figure 6-5Maynard Inc. manufactures desks. The following data was given for production in February:

	units, beginning work in process	0
	units started	200
	units completed	?
	units, ending work in process (40% complete)	50

Refer to Figure 6-5. If a total of $11,050 in production costs were incurred, what is the unit cost in February?
A. $65
B. $55.25
C. $73.67
D. $221
E. none of the above

1. Figure 6-5Maynard Inc. manufactures desks. The following data was given for production in February:

	units, beginning work in process	0
	units started	200
	units completed	?
	units, ending work in process (40% complete)	50

Refer to Figure 6-5. If a total of $11,050 in production costs were incurred, how much cost is assigned to the units completed?
A. $11,050
B. $3.250
C. $8,287.50
D. $9,750
E. none of the above

1. “Total costs to account for” does NOT include which of the following costs?
   A. direct materials requisitioned for the department
   B. prior department costs transferred in
   C. ending work-in-process balance
   D. beginning work-in-process balance

1. Figure 6-6Mannassass Company manufactures chairs. The following information was given for the company:

	units, beginning work in process	0
	units started	20,000
	units completed	?
	units, ending work in process	5,000
	cost of direct materials	$440,000
	cost of conversion	$ 64,000

Materials in the ending inventory were 100 percent complete and conversion in the ending inventory was 20 percent complete.

Refer to Figure 6-6. What are the units started and completed?
A. 20,000
B. 10,000
C. 15,000
D. 40,000
E. none of the above

1. Figure 6-6Mannassass Company manufactures chairs. The following information was given for the company:

	units, beginning work in process	0
	units started	20,000
	units completed	?
	units, ending work in process	5,000
	cost of direct materials	$440,000
	cost of conversion	$ 64,000

Materials in the ending inventory were 100 percent complete and conversion in the ending inventory was 20 percent complete.

Refer to Figure 6-6. What are the equivalent units for materials and conversion respectively?
A. 20,000; 20,000
B. 20,000; 16,000
C. 15,000; 15,000
D. 15,000; 14,000
E. none of the above

1. Figure 6-6Mannassass Company manufactures chairs. The following information was given for the company:

	units, beginning work in process	0
	units started	20,000
	units completed	?
	units, ending work in process	5,000
	cost of direct materials	$440,000
	cost of conversion	$ 64,000

Materials in the ending inventory were 100 percent complete and conversion in the ending inventory was 20 percent complete.

Refer to Figure 6-6. What are the costs per unit for materials and conversion respectively?
A. $22; $4
B. $29.33; $4.27
C. $11; $1.60
D. $88; $64
E. none of the above

1. Figure 6-6Mannassass Company manufactures chairs. The following information was given for the company:

	units, beginning work in process	0
	units started	20,000
	units completed	?
	units, ending work in process	5,000
	cost of direct materials	$440,000
	cost of conversion	$ 64,000

Materials in the ending inventory were 100 percent complete and conversion in the ending inventory was 20 percent complete.

Refer to Figure 6-6. What cost is assigned to ending work in process?
A. $110,000
B. $126,000
C. $130,000
D. $114,000
E. none of the above

1. The following information pertains to Firewire Corporation:

	Units
Work in process, November 1 (20% complete)	3,000
Started in November	24,000

Materials are added at the beginning of the process.

If 18,000 units were completed during the month, ending work in process at November 30 is
A. 9,000 units.
B. 6,000 units.
C. 3,000 units.
D. 15,000 units.

1. The two methods used to determine equivalent units of production are
   A. FIFO and LIFO.
   B. weighted average and LIFO.
   C. weighted average and FIFO.
   D. FIFO and specific identification.

1. Figure 6-7Edelstein Company had the following data for 2014:

Units in process at the beginning of the month	4,000
Units in process at the end of the month	10,000
Units started during the month	40,000

Materials are added at the beginning of the process. Beginning work in process was 40 percent complete as to conversion. Ending work in process was 70 percent complete as to conversion.

Refer to Figure 6-7. What is the number of units completed and transferred out during the period?
A. 34,000 units
B. 54,000 units
C. 44,000 units
D. 40,000 units

1. Figure 6-7Edelstein Company had the following data for 2014:

Units in process at the beginning of the month	4,000
Units in process at the end of the month	10,000
Units started during the month	40,000

Materials are added at the beginning of the process. Beginning work in process was 40 percent complete as to conversion. Ending work in process was 70 percent complete as to conversion.

Refer to Figure 6-7. How many equivalent units for materials would there be using the FIFO method?
A. 44,000 units
B. 30,000 units
C. 40,000 units
D. 39,400 units

1. The unit-costing method that excludes prior-period work and costs in computing current-period unit work and costs is called:
   A. Transferred-in cost method
   B. FIFO costing method
   C. Weighted average method
   D. Equivalent units method

1. Unit cost of materials for a department using the FIFO method of process costing is found by taking the total cost of materials issued to the department during the year divided by
   A. units in process.
   B. units started and completed.
   C. total units manufactured.
   D. equivalent units of output.

1. Figure 6-8Thunder Roads Enterprises makes the following information available:

Units in process at the beginning of the month	2,000
Units in process at the end of the month	4,000
Units started during the month	30,000

Materials are added at the beginning of the process.

Refer to Figure 6-8. Beginning and ending units were 60 percent complete as to conversion costs. What is the number of units started and completed?
A. 36,000 units
B. 30,000 units
C. 28,000 units
D. 26,000 units

1. Figure 6-8Thunder Roads Enterprises makes the following information available:

Units in process at the beginning of the month	2,000
Units in process at the end of the month	4,000
Units started during the month	30,000

Materials are added at the beginning of the process.

Refer to Figure 6-8. Beginning and ending units were 60 percent converted. How many equivalent units for materials would there be using the FIFO method?
A. 36,000 units
B. 34,000 units
C. 30,000 units
D. 29,200 units

1. Figure 6-9Anzalone Corporation adds raw materials to production at the beginning of the process in the Assembly Department. Materials data for this department for May 2014 are as follows:

	Costs
	Units	Materials	Conversion
Work in process, May 1	25,000	$ 68,750	$167,650
Started during May	100,000	300,000	903,350
Work in process, May 31	10,000

Beginning inventory was 70 percent complete. Ending inventory was 40 percent complete.

Refer to Figure 6-9. How many equivalent units for materials would there be for Anzalone Corporation in May using the FIFO method?
A. 110,000 units
B. 100,000 units
C. 125,000 units
D. 119,000 units

1. Figure 6-9Anzalone Corporation adds raw materials to production at the beginning of the process in the Assembly Department. Materials data for this department for May 2014 are as follows:

	Costs
	Units	Materials	Conversion
Work in process, May 1	25,000	$ 68,750	$167,650
Started during May	100,000	300,000	903,350
Work in process, May 31	10,000

Beginning inventory was 70 percent complete. Ending inventory was 40 percent complete.

Refer to Figure 6-9. How many equivalent units for conversion costs would there be for Anzalone Corporation in May using the FIFO method?
A. 100,000 units
B. 111,500 units
C. 125,000 units
D. 101,500 units

1. If beginning inventory contained 3,000 units of product that were judged to be 60 percent complete as to labor, the equivalent units of production for labor during the current period under the FIFO method for these 3,000 units are
   A. 3,000 units.
   B. 1,200 units.
   C. 1,800 units.
   D. 500 units.

1. Layla Company began making mascara in November 2014 using a single-step process. Layla incurred $42,000 for materials and $48,640 for conversion during the month. There were 21,000 cases of mascara started in November and 3,000 cases unfinished (40 percent complete) at the end of the period. All materials were added at the beginning of the production process.What is the unit cost for materials for Layla using the FIFO method?
   A. $2.00
   B. $2.03
   C. $4.53
   D. none of the above

1. Figure 6-10Julius Corporation’s mixing department began January 2014 with 10,000 gallons of product (40 percent completed) in process. During January, Julius started 100,000 gallons of new product, of which 15,000 gallons remained in ending inventory (70 percent completed).

   Refer to Figure 6-10. If materials were added at the beginning of the process, how many equivalent units of production for conversion costs would there be for Julius using the FIFO costing method?
   A. 101,500 units
   B. 110,000 units
   C. 105,500 units
   D. 116,500 units

1. Figure 6-10Julius Corporation’s mixing department began January 2014 with 10,000 gallons of product (40 percent completed) in process. During January, Julius started 100,000 gallons of new product, of which 15,000 gallons remained in ending inventory (70 percent completed).

   Refer to Figure 6-10. If materials were added when the units are 50 percent complete, how many equivalent units of production for materials would there be for Julius Corporation using the FIFO costing method?
   A. 101,500 units
   B. 105,500 units
   C. 110,000 units
   D. 85,000 units

1. The following information pertains to the Springfield Company:

	Units
Work-in-process inventory, June 1 (30% complete)	20,000
Units transferred in	50,000
Work-in-process inventory, June 30 (60% complete)	16,000

Materials are added at the start of the process.

How many equivalent units for conversion costs would there be using the FIFO method?
A. 49,600 units
B. 70,000 units
C. 50,000 units
D. 57,600 units

1. Figure 6-11Rawlings, Inc. manufactures a product that passes through two processes: mixing and molding. All manufacturing costs are added uniformly in the Mixing Department. Information for the Mixing Department for January follows:

Work in process, January 1:
Units (35% complete)	7,500
Direct materials	$36,000
Direct labor	$45,000
Overhead	$15,000

During January, 26,750 units were completed and transferred to the Molding Department. The following costs were incurred by the Mixing Department during January:

Direct materials	$133,050
Direct labor	180,000
Overhead (applied)	45,000

Refer to Figure 6-11. There were 2,500 units that were 80 percent complete remaining in Mixing at January 31. The amount of total costs to account for is
A. $454,050.
B. $396,000.
C. $360,000.
D. none of the above.

1. Figure 6-11Rawlings, Inc. manufactures a product that passes through two processes: mixing and molding. All manufacturing costs are added uniformly in the Mixing Department. Information for the Mixing Department for January follows:

Work in process, January 1:
Units (35% complete)	7,500
Direct materials	$36,000
Direct labor	$45,000
Overhead	$15,000

During January, 26,750 units were completed and transferred to the Molding Department. The following costs were incurred by the Mixing Department during January:

Direct materials	$133,050
Direct labor	180,000
Overhead (applied)	45,000

Refer to Figure 6-11. There were 3,750 units that were 80 percent complete remaining in Mixing at January 31. Total cost per equivalent unit of production using the FIFO method is
A. $12.16.
B. $13.20.
C. $9.76.
D. none of the above.

1. Figure 6-11Rawlings, Inc. manufactures a product that passes through two processes: mixing and molding. All manufacturing costs are added uniformly in the Mixing Department. Information for the Mixing Department for January follows:

Work in process, January 1:
Units (35% complete)	7,500
Direct materials	$36,000
Direct labor	$45,000
Overhead	$15,000

During January, 26,750 units were completed and transferred to the Molding Department. The following costs were incurred by the Mixing Department during January:

Direct materials	$133,050
Direct labor	180,000
Overhead (applied)	45,000

Refer to Figure 6-11. The cost of January’s ending work in process for the Mixing Department using the FIFO method is
A. $26,250.
B. $50,400.
C. $63,000.
D. none of the above.

1. Refer to Figure 6-11. There were 3,750 units that were 80 percent complete remaining in Mixing at January 31. The cost of goods transferred to the Molding Department during January using the FIFO method is
   A. $414,450.
   B. $391,575.
   C. $323,400.
   D. none of the above.

1. Beginning inventory consisted of 1,000 units with costs of $31,000. All materials and 60 percent of labor and overhead were added in the prior period. In addition, another 8,000 units were started and completed. Unit costs are materials, $8.00; labor, $20.00; overhead, $9.00. What is the total cost of goods transferred out using FIFO?
   A. $296,000
   B. $338,600
   C. $332,400
   D. $338,000

1. Phantom Enterprises adds materials to production at the beginning of the process in the Production Department. It uses a single-step process. Data on material for this department for July 2014 are as follows:

Production data (units):
In process, beginning of July	10,000
Started during July	60,000
Completed and transferred out during July	55,000
Manufacturing cost:
Work in process, beginning	$39,000
Materials used in July	$186,000

The company uses the FIFO inventory method.

The materials cost in Work in Process on July 31 is
A. $37,500.
B. $31,000.
C. $39,000.
D. $46,500.

1. Figure 6-12Twinnings Corporation manufactures Scheduling Books. There are two processes: printing and binding. The following information is given for the printing department for September.

   Units:

units, beginning work in process	40,000 (20% complete for materials, 60% complete for conversion)
started	300,000
completed	?
units, ending work in process	50,000 (25% complete for materials, 80% complete for conversion)

Costs:

	Materials	Conversion	Total
beginning work in process	$ 6,080	$ 2,160	$ 8,240
current costs	$220,875	$30,600	$251,475
total costs	$226,955	$32,760	$259,715

The company uses FIFO inventory assumption.

Refer to Figure 6-12. What are the FIFO equivalent units for materials?
A. 304,500
B. 294,500
C. 302,500
D. 262,500
E. none of the above

1. Figure 6-12Twinnings Corporation manufactures Scheduling Books. There are two processes: printing and binding. The following information is given for the printing department for September.

   Units:

units, beginning work in process	40,000 (20% complete for materials, 60% complete for conversion)
started	300,000
completed	?
units, ending work in process	50,000 (25% complete for materials, 80% complete for conversion)

Costs:

	Materials	Conversion	Total
beginning work in process	$ 6,080	$ 2,160	$ 8,240
current costs	$220,875	$30,600	$251,475
total costs	$226,955	$32,760	$259,715

The company uses FIFO inventory assumption.

Refer to Figure 6-12. What are the FIFO equivalent units for conversion?
A. 306,000
B. 340,000
C. 316,000
D. 300,000
E. none of the above

1. Figure 6-12Twinnings Corporation manufactures Scheduling Books. There are two processes: printing and binding. The following information is given for the printing department for September.

   Units:

units, beginning work in process	40,000 (20% complete for materials, 60% complete for conversion)
started	300,000
completed	?
units, ending work in process	50,000 (25% complete for materials, 80% complete for conversion)

Costs:

	Materials	Conversion	Total
beginning work in process	$ 6,080	$ 2,160	$ 8,240
current costs	$220,875	$30,600	$251,475
total costs	$226,955	$32,760	$259,715

The company uses FIFO inventory assumption.

Refer to Figure 6-12. What are the FIFO cost per unit for conversion?
A. $0.90
B. $0.11
C. $0.66
D. $0.10
E. none of the above

1. Figure 6-12Twinnings Corporation manufactures Scheduling Books. There are two processes: printing and binding. The following information is given for the printing department for September.

   Units:

units, beginning work in process	40,000 (20% complete for materials, 60% complete for conversion)
started	300,000
completed	?
units, ending work in process	50,000 (25% complete for materials, 80% complete for conversion)

Costs:

	Materials	Conversion	Total
beginning work in process	$ 6,080	$ 2,160	$ 8,240
current costs	$220,875	$30,600	$251,475
total costs	$226,955	$32,760	$259,715

The company uses FIFO inventory assumption.

Refer to Figure 6-12. What are the FIFO cost per unit for materials?
A. $1.00
B. $0.77
C. $0.75
D. $0.65
E. none of the above

1. Figure 6-12Twinnings Corporation manufactures Scheduling Books. There are two processes: printing and binding. The following information is given for the printing department for September.

   Units:

units, beginning work in process	40,000 (20% complete for materials, 60% complete for conversion)
started	300,000
completed	?
units, ending work in process	50,000 (25% complete for materials, 80% complete for conversion)

Costs:

	Materials	Conversion	Total
beginning work in process	$ 6,080	$ 2,160	$ 8,240
current costs	$220,875	$30,600	$251,475
total costs	$226,955	$32,760	$259,715

The company uses FIFO inventory assumption.

Refer to Figure 6-12. What is the journal entry for the cost of goods sent to binding?
A. work in process – binding $246,500
work in process – printing $246,500
B. work in process – printing $246,340
work in process – binding $246,340
C. work in process – binding $246,340
work in process – printing $246,340
D. work in process – printing $246,500
work in process – binding $246,500
E. none of the above

1. The unit-costing method that merges prior-period work and costs with current-period work and costs is called:
   A. Operating costing
   B. Transferred-in cost
   C. FIFO costing method
   D. Weighted average method

1. When computing equivalent units of production, the method that combines partially completed units in beginning inventory with current period production is
   A. the FIFO method.
   B. the LIFO method.
   C. the specific identification method.
   D. the weighted average method.

1. Beginning inventory consisted of 10,000 units (20 percent converted) and ending inventory consisted of 20,000 units (40 percent converted). In addition, 60,000 units were started during the period. How many equivalent units for conversion costs were produced using the weighted average method?
   A. 50,000 units
   B. 56,000 units
   C. 70,000 units
   D. 58,000 units

1. The following information is available:

Units in process, November 1 (60% converted)	2,000 units
Units in process, November 30 (60% converted)	4,000 units
Units started during the month	30,000 units

Materials are added at the beginning of the process.

How many equivalent units for conversion would there be in November using the weighted average method?
A. 30,400 units
B. 36,000 units
C. 32,000 units
D. 33,200 units

1. Figure 6-13Wonder Paints Corporation’s Mixing Department began August 2014 with 10,000 gallons of product (40 percent completed) in process. During August, Wonder Paints started 100,000 gallons of new product, of which 15,000 gallons remained in ending inventory (70 percent completed).

   Refer to Figure 6-13. If materials were added at the beginning of the process, how many equivalent units of production for conversion costs would there be for Wonder Paints using the weighted average costing method?
   A. 120,500 units
   B. 110,000 units
   C. 105,500 units
   D. 99,500 units

1. Figure 6-13Wonder Paints Corporation’s Mixing Department began August 2014 with 10,000 gallons of product (40 percent completed) in process. During August, Wonder Paints started 100,000 gallons of new product, of which 15,000 gallons remained in ending inventory (70 percent completed).

   Refer to Figure 6-13. If materials were added when the units were 80 percent complete, how many equivalent units of production for materials would there be for Wonder Paints using the weighted average costing method?
   A. 95,000 units
   B. 110,000 units
   C. 107,000 units
   D. 105,500 units

1. The following information pertains to Mcintosh Company:

Work-in-process inventory, February 1 (30% complete)	20,000 units
Units transferred in	50,000 units
Work-in-process inventory, February 29 (60% complete)	16,000 units

Materials are added at the start of the process.

How many equivalent units for materials would there be using the weighted average method?
A. 86,000 units
B. 70,000 units
C. 50,000 units
D. 57,600 units

1. Beginning inventory for the month contained 3,000 units that were 35 percent complete with respect to materials. 55,000 units were completed and transferred out during the month. 5,500 units were in ending inventory, 10 percent complete with respect to materials. The weighted average equivalent units of production for materials for the month would be
   A. 55,000 units.
   B. 55,550 units.
   C. 56,500 units.
   D. 57,550 units.

1. The costs included in the cost per equivalent unit using the weighted average method are
   A. current costs.
   B. beginning work in process.
   C. ending work in process.
   D. both a and b.

1. The following information pertains to Southland Company:

	Units
Work in process, April 1 (20% complete)	8,000
Started in January	40,000
Work in process, April 30	12,000

Materials are added at the beginning of the process.

If equivalent units of production for conversion using the weighted average method was 39,000, ending work in process at April 30 must have been
A. 15.0% complete.
B. 25.0% complete.
C. 30.0% complete.
D. 97.5% complete.

1. The material cost per equivalent unit using the weighted average method is calculated as
   A. total material costs to account for/equivalent units for materials.
   B. material costs added during the period/equivalent units for materials.
   C. total material costs to account for/number of partially completed units for materials.
   D. material costs added during the period/number of partially completed units for materials.

1. Which is NOT a disadvantage of the weighted average costing assumption in process costing?
   A. There is a possibility of errors when input costs are changing significantly from one period to the next.
   B. The cumulative effect of an error might produce a significant distortion in the cost of the final product.
   C. The performance of the current period is combined with the performance of the current period making it difficult to compare costs between periods.
   D. Unit costs are simpler to calculate.

1. Figure 6-14The following information is available for Department C for the month of June:

	Units	Cost
Work in process, June 1 (70% complete)	10,000
Direct materials		$ 36,000
Direct labor		18,000
Manufacturing overhead		24,000
Total work in process, June 1		$ 78,000
Started in production during June	40,000
Costs added:
Direct materials		$108,000
Direct labor		48,000
Manufacturing overhead		60,600
Total costs added during June		$216,600
Work in process, June 30 (80% complete)	4,000

Materials are added at the beginning of the process. Round unit costs to two decimal places.

Refer to Figure 6-14. The cost per equivalent unit of production for materials using the weighted average method is
A. $2.70.
B. $2.88
C. $3.12..
D. $3.60.

1. Figure 6-14The following information is available for Department C for the month of June:

	Units	Cost
Work in process, June 1 (70% complete)	10,000
Direct materials		$ 36,000
Direct labor		18,000
Manufacturing overhead		24,000
Total work in process, June 1		$ 78,000
Started in production during June	40,000
Costs added:
Direct materials		$108,000
Direct labor		48,000
Manufacturing overhead		60,600
Total costs added during June		$216,600
Work in process, June 30 (80% complete)	4,000

Materials are added at the beginning of the process. Round unit costs to two decimal places.

Refer to Figure 6-14. The cost per equivalent unit of production for conversion using the weighted average method is
A. $3.54.
B. $3.06.
C. $2.55.
D. $2.19.

1. Figure 6-14The following information is available for Department C for the month of June:

	Units	Cost
Work in process, June 1 (70% complete)	10,000
Direct materials		$ 36,000
Direct labor		18,000
Manufacturing overhead		24,000
Total work in process, June 1		$ 78,000
Started in production during June	40,000
Costs added:
Direct materials		$108,000
Direct labor		48,000
Manufacturing overhead		60,600
Total costs added during June		$216,600
Work in process, June 30 (80% complete)	4,000

Materials are added at the beginning of the process. Round unit costs to two decimal places.

Refer to Figure 6-14. The cost of goods transferred out using the weighted average method is
A. $273,600.
B. $241,500.
C. $273,240.
D. none of the above.

1. Figure 6-14The following information is available for Department C for the month of June:

	Units	Cost
Work in process, June 1 (70% complete)	10,000
Direct materials		$ 36,000
Direct labor		18,000
Manufacturing overhead		24,000
Total work in process, June 1		$ 78,000
Started in production during June	40,000
Costs added:
Direct materials		$108,000
Direct labor		48,000
Manufacturing overhead		60,600
Total costs added during June		$216,600
Work in process, June 30 (80% complete)	4,000

Materials are added at the beginning of the process. Round unit costs to two decimal places.

Refer to Figure 6-14. The cost of ending work in process using the weighted average method is
A. $23,760.
B. $21,312.
C. $16,992.
D. none of the above.

1. Mortimer Company manufactures a product that passes through two processes: Mixing and Molding. All manufacturing costs are added uniformly in the Mixing Department. Information for the Mixing Department for May follows:

Work in process, May 1:
Units (35% complete)	7,500
Direct materials	$36,000
Direct labor	$45,000
Overhead	$15,000

During May, 37,500 units were completed and transferred to the Molding Department. The following costs were incurred by the Mixing Department during May:

Direct materials	$135,000
Direct labor	180,000
Overhead	45,000

There were 3,750 units that were 80 percent complete remaining in mixing at May 31. The equivalent units of production using the weighted average method is

A. 43,125 units
B. 40,500 units
C. 30,000 units
D. 34,500 units

1. Transferred-in costs are accounted for in the same manner as
   A. materials added at the beginning of the process.
   B. materials added at the end of the process.
   C. conversion costs.
   D. labor costs.

1. Figure 6-15The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%.

Units:	units	% complete for conversions
work in process, 1/1	60,000	15%
started	105,000
work in process, 1/31	40,000	20%
Costs:
	Materials	Conversion
beginning work in process	$ 16,500	$ 33,250
current costs	$643,500	$332,500

Refer to Figure 6-15. What are the equivalent units for materials?
A. 133,000
B. 100,000
C. 165,000
D. 125,000
E. none of the above

1. Figure 6-15The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%.

Units:	units	% complete for conversions
work in process, 1/1	60,000	15%
started	105,000
work in process, 1/31	40,000	20%
Costs:
	Materials	Conversion
beginning work in process	$ 16,500	$ 33,250
current costs	$643,500	$332,500

Refer to Figure 6-15. What are the equivalent units for conversion?
A. 133,000
B. 165,000
C. 125,000
D. 100,000
E. none of the above

1. Figure 6-15The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%.

Units:	units	% complete for conversions
work in process, 1/1	60,000	15%
started	105,000
work in process, 1/31	40,000	20%
Costs:
	Materials	Conversion
beginning work in process	$ 16,500	$ 33,250
current costs	$643,500	$332,500

Refer to Figure 6-15. What is the cost per unit for conversion?
A. $2.79
B. $2.75
C. $2.50
D. $2.22
E. none of the above

1. Figure 6-15The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%.

Units:	units	% complete for conversions
work in process, 1/1	60,000	15%
started	105,000
work in process, 1/31	40,000	20%
Costs:
	Materials	Conversion
beginning work in process	$ 16,500	$ 33,250
current costs	$643,500	$332,500

Refer to Figure 6-15. What is the cost per unit for materials?
A. $4.00
B. $3.90
C. $4.96
D. $2.75
E. none of the above

1. Figure 6-15The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%.

Units:	units	% complete for conversions
work in process, 1/1	60,000	15%
started	105,000
work in process, 1/31	40,000	20%
Costs:
	Materials	Conversion
beginning work in process	$ 16,500	$ 33,250
current costs	$643,500	$332,500

Refer to Figure 6-15. What is the cost assigned to the units completed and transferred to finishing?
A. $843,750
B. $708,750
C. $777,500
D. $976,000
E. none of the above

1. Which of the following process costing methods is simpler to use?
   A. weighted average
   B. LIFO
   C. FIFO
   D. specific identification

1. Figure 6-16Ramses Corporation produces a product that passes through two processes. During April, the first department transferred 19,000 units to the second department. The cost of the units transferred was $30,000. Materials are added uniformly in the second process. The following information is provided about the second department’s operations during October:

Units, beginning work in process	4,000
Units, ending work in process	5,500

Refer to Figure 6-16. The number of units started in the second department during April is
A. 15,000 units.
B. 13,500 units.
C. 19,000 units.
D. 23,000 units.

1. Figure 6-16Ramses Corporation produces a product that passes through two processes. During April, the first department transferred 19,000 units to the second department. The cost of the units transferred was $30,000. Materials are added uniformly in the second process. The following information is provided about the second department’s operations during October:

Units, beginning work in process	4,000
Units, ending work in process	5,500

Refer to Figure 6-16. The number of units completed in the second department during April is
A. 17,500 units.
B. 9,500 units.
C. 23,000 units.
D. 28,500 units.

1. Figure 6-16Ramses Corporation produces a product that passes through two processes. During April, the first department transferred 19,000 units to the second department. The cost of the units transferred was $30,000. Materials are added uniformly in the second process. The following information is provided about the second department’s operations during October:

Units, beginning work in process	4,000
Units, ending work in process	5,500

Refer to Figure 6-16. The number of units started and completed in the second department during April is
A. 13,500 units.
B. 17,500 units.
C. 8,500 units.
D. 26,500 units.

1. Materials are added to a second production department and will not increase the number of units produced in this department. Adding materials to the second department will
   A. decrease total ending work in process.
   B. change the amount of factory overhead included in the ending work in process.
   C. increase total unit cost.
   D. not change the dollar amount transferred out of the department.

1. Figure 6-17Loganbery Corporation produces a product that passes through two processes. During January, the first department transferred 20,000 units to the second department. The cost of the units transferred was $60,000. Materials are added uniformly in the second process. The following information is provided about the first department’s operations during January:

Units, beginning work in process (1/3 complete)	6,000
Units, ending work in process (1/2 complete)	4,000

Refer to Figure 6-17. The equivalent units for those transferred in from the prior department using weighted average is
A. 16,000 units.
B. 20,000 units.
C. 14,000 units.
D. 26,000 units.

1. Figure 6-17Loganbery Corporation produces a product that passes through two processes. During January, the first department transferred 20,000 units to the second department. The cost of the units transferred was $60,000. Materials are added uniformly in the second process. The following information is provided about the first department’s operations during January:

Units, beginning work in process (1/3 complete)	6,000
Units, ending work in process (1/2 complete)	4,000

Refer to Figure 6-17. The equivalent units for conversion using weighted average is
A. 10,000 units.
B. 16,000 units.
C. 26,000 units.
D. 24,000 units.

1. Figure 6-17Loganbery Corporation produces a product that passes through two processes. During January, the first department transferred 20,000 units to the second department. The cost of the units transferred was $60,000. Materials are added uniformly in the second process. The following information is provided about the first department’s operations during January:

Units, beginning work in process (1/3 complete)	6,000
Units, ending work in process (1/2 complete)	4,000

Refer to Figure 6-17. The equivalent units for those transferred in from the prior department using FIFO would be
A. 10,000 units.
B. 20,000 units.
C. 26,000 units.
D. 22,000 units.

1. Figure 6-17Loganbery Corporation produces a product that passes through two processes. During January, the first department transferred 20,000 units to the second department. The cost of the units transferred was $60,000. Materials are added uniformly in the second process. The following information is provided about the first department’s operations during January:

Units, beginning work in process (1/3 complete)	6,000
Units, ending work in process (1/2 complete)	4,000

Refer to Figure 6-17. The equivalent units for conversion using FIFO would be
A. 10,000 units.
B. 12,000 units.
C. 26,000 units.
D. 22,000 units.

1. The cost assigned to goods from a prior process is termed:
   A. Operating costing
   B. Transferred-in cost
   C. Weighted average method
   D. FIFO costing method

1. Figure 6-18The Round Table Company makes carpenter’s squares and uses a process costing system. There is no spoilage. Manufacturing goes through three departments: Forming, Finishing, and Packing. Unit data for these departments are given below:

	Forming	Finishing	Packing
Beginning inventory units
(80% complete)	1,000	2,000	3,000
Units started	8,000	?	?
Ending inventory units
(20% complete)	3,000	4,000	1,000

The Finishing Department adds materials at the point where processing is 50 percent complete.

Refer to Figure 6-18. The equivalent units for materials in the Finishing Department is

Weighted Average	FIFO

1. 4,000 2,000
   B. 4,800 3,200
   C. 6,000 3,000
   D. 8,000 8,000
   E. none of the above

1. Refer to Figure 6-18. The equivalent units for transferred-in the Finishing Department is

Weighted Average	FIFO

1. 4,000 2,000
   B. 4,800 3,200
   C. 6,000 3,000
   D. 8,000 6,000

1. Figure 6-19Mountainside Industries manufactures specialized plastic boxes in two processes: Molding and Packaging. In the Packaging Department, materials are added at the end of the process. The following data are given:

		Costs
	Units	Trans.-in	Materials	Conv.
Work in process, July 1	30	$1,590	$-0-	$513
Transferred in during July	?
Completed during July	105
Work in process, July 31	15
Costs added during July		$4,410	$1,050	$1,767

The conversion process on the beginning inventory is 70 percent completed and the ending inventory is 60 percent completed.

Refer to Figure 6-19. Mountainside’s equivalent units for conversion using FIFO would be
A. 114.
B. 105.
C. 93.
D. 9.

1. Figure 6-19Mountainside Industries manufactures specialized plastic boxes in two processes: Molding and Packaging. In the Packaging Department, materials are added at the end of the process. The following data are given:

		Costs
	Units	Trans.-in	Materials	Conv.
Work in process, July 1	30	$1,590	$-0-	$513
Transferred in during July	?
Completed during July	105
Work in process, July 31	15
Costs added during July		$4,410	$1,050	$1,767

The conversion process on the beginning inventory is 70 percent completed and the ending inventory is 60 percent completed.

Refer to Figure 6-19.Mountainside’s equivalent units for materials using weighted average would be
A. 15.
B. 90.
C. 105.
D. 120.

1. Figure 6-19Mountainside Industries manufactures specialized plastic boxes in two processes: Molding and Packaging. In the Packaging Department, materials are added at the end of the process. The following data are given:

		Costs
	Units	Trans.-in	Materials	Conv.
Work in process, July 1	30	$1,590	$-0-	$513
Transferred in during July	?
Completed during July	105
Work in process, July 31	15
Costs added during July		$4,410	$1,050	$1,767

The conversion process on the beginning inventory is 70 percent completed and the ending inventory is 60 percent completed.

Refer to Figure 6-19. Mountainside’s equivalent units for transferred-in units using FIFO would be
A. 15.
B. 90.
C. 105.
D. 120.

153. Figure 6-19

Mountainside Industries manufactures specialized plastic boxes in two processes: Molding and Packaging. In

Chapter 7–Allocating Costs of Support Departments and Joint Products

Student: ___________________________________________________________________________

1. Common costs are mutually beneficial costs, used in the output of two or more services or products.
   True False

1. Allocation increases total costs.
   True False

1. Producing departments create products and services to make and sell.
   True False

1. Producing departments provide essential services for support departments.
   True False

1. Causal factors are variables or activities within a producing department that stimulate the incurrence of support costs.
   True False

1. A single changing rate uses the fixed costs of the support department.
   True False

1. The use of a multiple charging rate is needed, one for variable costs, and one for fixed costs.
   True False

1. Dual rates combine the fixed and variable costs.
   True False

1. Support department fixed costs are allocated on the basis of original capacity.
   True False

1. Budgeted rates are allocated based on original capacity.
   True False

1. The three methods of allocating support center costs to producing departments are the direct, sequential, and reciprocal methods
   True False

1. The direct method is the most difficult way to allocate costs to the support departments.
   True False

1. The sequential method allocates costs in ranking order of support departments.
   True False

1. The reciprocal method of allocation recognizes only some of the support departments’ interactions.
   True False

1. Allocation is not necessary when using JIT manufacturing.
   True False

1. The overhead rate may be computed once allocation from support service cost to producing department has been performed.
   True False

1. Departmental overhead rate is computed by dividing the budgeted base by the total overhead in a producing department.
   True False

1. Departmental overhead is applied to products passing through the department.
   True False

1. The choice of allocation method depends on an evaluation of costs and benefits, and circumstances.
   True False

1. Joint production processes result in the output of two or more products produced simultaneously.
   True False

1. Joint products are two or more products produced simultaneously by the same process.
   True False

1. The split-off point is the ending point of a joint product process.
   True False

1. Costs that are easily traced to individual products are called separable costs.
   True False

1. Under the physical units method, joint costs are distributed to products on the basis of some physical measure.
   True False

1. The weight factor addresses the advantages of the physical units method.
   True False

1. __________ are mutually beneficial costs to joint product costing.
   ________________________________________

1. Activities or variables within a producing department that provoke the incurrence of support costs are called __________ .
   ________________________________________

1. The __________ charging rate combines variable and fixed costs of support departments.
   ________________________________________

1. Support department __________ costs are allocated on the basis of original capacity.
   ________________________________________

1. The __________ method of allocating costs, allocates costs from support to producing departments.
   ________________________________________

1. The __________ method of allocating costs assumes “step down” interdepartmental services.
   ________________________________________

1. After allocation, total overhead in producing department is divided by the budgeted measure of activity to get the __________ overhead rate.
   ________________________________________

1. Departmental __________ is applied to products passing through the department.
   ________________________________________

1. Products produced simultaneously by the same process up to a point are called __________ products.
   ________________________________________

1. A secondary product recovered during the manufacturing of a primary product during a joint process is called a(n): __________ .
   ________________________________________

1. Support department cost to the producing departments is(are) called:
   A. direct materials
   B. direct labor
   C. activity driver
   D. common cost

1. A common cost occurs
   A. when only one product or service is benefited.
   B. when different resources are used to produce one output.
   C. when the same resource is used in the output of two or more outputs.
   D. when a resource is used by two or more companies.

1. Support departments
   A. are responsible for manufacturing the products sold to customers.
   B. work directly on the products of the firm.
   C. provide services directly to customers.
   D. provide essential services to the producing departments.

1. Examples of support departments include all of the following EXCEPT
   A. maintenance.
   B. personnel.
   C. machining.
   D. data processing.

1. Which of the following departments is NOT a support department?
   A. food services
   B. bottling
   C. health services
   D. security

1. The activities or variables within a producing department that provoke the incurrence of support costs are called:
   A. Causal factors
   B. Common costs
   C. Cost objectives
   D. Activity output

1. Examples of producing departments include all of the following EXCEPT
   A. mixing.
   B. molding.
   C. packaging.
   D. accounting.

1. Support department costs are accounted for in which one of the following ways?
   A. They are allocated directly to units of product.
   B. They are allocated to producing departments and then allocated to units of product.
   C. They are allocated to units of product and then allocated to the producing departments.
   D. They are expensed as incurred.

1. Which of the following would be the most appropriate base for allocating the costs of the housekeeping department?
   A. machine hours
   B. direct labor hours
   C. square feet
   D. number of employees

1. Which of the following would be the most appropriate base for allocating the costs of the maintenance department?
   A. machine hours
   B. direct labor hours
   C. number of employees
   D. square feet

1. A possible causal factor to use when allocating cafeteria costs would be
   A. number of square feet.
   B. number of direct labor hours.
   C. number of employees.
   D. appraised value of square footage.

1. The major objective(s) of allocations are
   A. to motivate managers.
   B. to compute product line profitability.
   C. to value inventory.
   D. all of the above.

1. Which of the following is NOT a major objective of allocation as identified by the IMA?
   A. to detect fraud
   B. to obtain a mutually agreeable price
   C. to compute product-line profitability
   D. to value inventory

1. Which of the following cost categories would most likely use machine hours as its activity driver?
   A. personnel
   B. maintenance
   C. purchasing
   D. both a and b

1. Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?
   A. maintenance
   B. purchasing
   C. personnel
   D. accounting

1. Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization?
   A. to obtain a mutually agreeable price
   B. to compute product-line profitability
   C. to predict the economic effects of planning and control
   D. all of the above are objectives of allocation

1. The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?
   A. personnel department costs based on number of employees
   B. purchasing department costs based on machine hours
   C. cafeteria costs based on meals served
   D. warehouse costs based on the value of materials stored

1. If the costs of support departments are NOT allocated to producing departments,
   A. product costs would be understated.
   B. GAAP requirements would not be met.
   C. managers of producing departments may tend to overconsume services.
   D. all of the above.

1. Rules of financial reporting (GAAP) require
   A. that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products.
   B. that only producing department costs be assigned to products.
   C. that only direct manufacturing costs be assigned to products.
   D. that only indirect manufacturing costs be assigned to products.

1. What is one of the potential disadvantages of NOT allocating support department costs to production departments?
   A. total costs would not be accumulated
   B. managers may tend to overconsume these services
   C. this would encourage managers to monitor support department performance
   D. managers will use a support service at a more efficient level

1. Which of the following is NOT a benefit of the costs of support departments being allocated to production departments?
   A. The allocation assists producing departments’ use of support departments at a more efficient level.
   B. Allocation of support department costs encourages managers of production departments to monitor performance of the support department.
   C. The allocation helps each department select the correct level of support service consumption.
   D. Management will use the information to support out-sourcing all support services.

1. What is the most likely action to be taken by a company when a support department is NOT as cost effective as an outside source?
   A. The company may force managers to use the internal support department.
   B. The company may force managers to use an external source for the service.
   C. The company may elect not to supply the service internally.
   D. all of the above

1. Figure 7-1Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2014 for its three departments:

	Sportswear	Lingerie	Appliances
Sales	$160,000	$120,000	$120,000
Direct advertising costs	$ 7,000	$ 12,000	$ 3,000
Newspaper ad space	62%	20%	18%

Refer to Figure 7-1. How much of the indirect advertising costs will be allocated to the Sportswear Department if newspaper ad space is the activity driver?
A. $6,000
B. $4,340
C. $3,720
D. $2,280

1. Refer to Figure 7-1. How much of the indirect advertising costs will be allocated to the Lingerie Department if direct advertising costs is the activity driver? (Round to the nearest dollar if necessary)
   A. $3,000
   B. $3,273
   C. $6,000
   D. $12,000

1. If a support department’s costs were budgeted to be $150,000 and actual costs incurred by the support department were $200,000, the total amount of the support department’s costs that should be allocated to other departments is
   A. $350,000.
   B. $200,000.
   C. $150,000.
   D. $50,000.

1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:

   Variable costs $34 per trip
   Fixed costs $143,360

   The budgeted usage is given below:
   Yearly Trips Monthly Peak Trips
   West Sales Territory 110 trips 5
   Midwest Sales Territory 170 trips 12
   Southern Sales Territory 150 trips 15
   Eastern Sales Territory 130 trips 8

   The actual usage is given below:

   West Sales Territory 100 trips
   Midwest Sales Territory 150 trips
   Southern Sales Territory 160 trips
   Eastern Sales Territory 140 trips

   Refer to Figure 7-2. Using a single charging rate, determine the rate per trip.
   A. $256
   B. $290
   C. $295
   D. $261
   E. $34

1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:

   Variable costs $34 per trip
   Fixed costs $143,360

   The budgeted usage is given below:
   Yearly Trips Monthly Peak Trips
   West Sales Territory 110 trips 5
   Midwest Sales Territory 170 trips 12
   Southern Sales Territory 150 trips 15
   Eastern Sales Territory 130 trips 8

   The actual usage is given below:

   West Sales Territory 100 trips
   Midwest Sales Territory 150 trips
   Southern Sales Territory 160 trips
   Eastern Sales Territory 140 trips

   Refer to Figure 7-2. Using a single charging rate, how much will be charged to the West Sales Territory?
   A. $29,000
   B. $31,900
   C. $29,500
   D. $28,160
   E. none of the above

1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:

   Variable costs $34 per trip
   Fixed costs $143,360

   The budgeted usage is given below:
   Yearly Trips Monthly Peak Trips
   West Sales Territory 110 trips 5
   Midwest Sales Territory 170 trips 12
   Southern Sales Territory 150 trips 15
   Eastern Sales Territory 130 trips 8

   The actual usage is given below:

   West Sales Territory 100 trips
   Midwest Sales Territory 150 trips
   Southern Sales Territory 160 trips
   Eastern Sales Territory 140 trips

   Refer to Figure 7-2. Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory? Fixed costs are allocated on the basis of monthly peak trips.
   A. 12.5%; $34
   B. 19.6%; $34
   C. 18.2%; $34
   D. 19%; $34
   E. none of the above

1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:

   Variable costs $34 per trip
   Fixed costs $143,360

   The budgeted usage is given below:
   Yearly Trips Monthly Peak Trips
   West Sales Territory 110 trips 5
   Midwest Sales Territory 170 trips 12
   Southern Sales Territory 150 trips 15
   Eastern Sales Territory 130 trips 8

   The actual usage is given below:

   West Sales Territory 100 trips
   Midwest Sales Territory 150 trips
   Southern Sales Territory 160 trips
   Eastern Sales Territory 140 trips

   Refer to Figure 7-2. Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips, what will the West Sales Territory be charged for the year? (round to the nearest dollar)
   A. $31,498
   B. $21,320
   C. $29,492
   D. $30,638
   E. none of the above

1. If the allocation is for product costing, the allocation of variable support department costs would be calculated as
   A. Actual rate ´ Actual usage.
   B. Actual rate ´ Budgeted usage.
   C. Budgeted rate ´ Actual usage.
   D. Budgeted rate ´ Budgeted usage.

1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
   165,000 and 35,000 from the trust area.

   Refer to Figure 7-3. Assuming a single charging rate is used, what would be the charge per page? (round to the nearest cent)
   A. $.04
   B. $.25
   C. $.21
   D. none of the above amounts

1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
   165,000 and 35,000 from the trust area.

   Refer to Figure 7-3. Assuming a single charging rate is used, if the Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (Round to the nearest cent.)
   A. $47,500
   B. $39,900
   C. $7,600
   D. $42,195

1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
   165,000 and 35,000 from the trust area.

   Refer to Figure 7-3. Assuming a single charging rate is used, if the total pages printed were 340,000, which of the following statements is correct?
   A. The printing costs allocated to all departments would be $85,000.
   B. The printing department would expect to incur costs of $82,790.
   C. Any extra amount charged is due to the fixed costs being charged as if they were variable costs.
   D. all of the above.

1. If the allocation is for performance evaluation, the allocation of variable support department costs would be calculated as
   A. Actual rate ´ Actual usage.
   B. Actual rate ´ Budgeted usage.
   C. Budgeted rate ´ Actual usage.
   D. Budgeted rate ´ Budgeted usage.

1. FIGURE 7-4Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.

   During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.

   Normal and actual activity (copies made) are as follows:

	Copy Center 1	Copy Center 2
Normal activity (copies)	600,000	400,000
Actual activity (copies)	500,000	440,000

Refer to Figure 7-4. For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are
A. $36,000.
B. $37,600.
C. $30,000.
D. $32,800.

1. FIGURE 7-4Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.

   During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.

   Normal and actual activity (copies made) are as follows:

	Copy Center 1	Copy Center 2
Normal activity (copies)	600,000	400,000
Actual activity (copies)	500,000	440,000

Refer to Figure 7-4. For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are
A. $28,800.
B. $60,000.
C. $51,200.
D. $24,000.

1. FIGURE 7-4Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.

   During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.

   Normal and actual activity (copies made) are as follows:

	Copy Center 1	Copy Center 2
Normal activity (copies)	600,000	400,000
Actual activity (copies)	500,000	440,000

Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are
A. $22,000.
B. $9,840.
C. $8,400.
D. $6,000.

1. A company incurred $40,000 of common fixed costs and $60,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows:

	Capacity Provided	Capacity Used
Department	in Hours	in Hours
A	800	640
B	480	640

Assume that common fixed costs are to be allocated to Departments A and B on the basis of capacity provided and that common variable costs are to be allocated to Departments A and B on the basis of capacity used. The fixed and variable costs allocated to Department A are

Fixed	Variable

1. $20,000 $37,500
   B. $20,000 $30,000
   C. $25,000 $30,000
   D. $25,000 $37,500

1. FIGURE 7-5Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.

   During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.

   Normal and actual activity (brochures made) are as follows:

	Brochure Center 1	Brochure Center 2
Normal activity (brochures)	1,200,000	800,000
Actual activity (brochures)	1,000,000	880,000

Refer to Figure 7-5.For purposes of performance evaluation, fixed costs allocated to
Brochure Center 1 are
A. $60,000.
B. $72,000.
C. $65,600.
D. $75,200.

1. FIGURE 7-5Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.

   During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.

   Normal and actual activity (brochures made) are as follows:

	Brochure Center 1	Brochure Center 2
Normal activity (brochures)	1,200,000	800,000
Actual activity (brochures)	1,000,000	880,000

Refer to Figure 7-5. For purposes of performance evaluation, fixed costs allocated to
Brochure Center 2 are
A. $57,600.
B. $120,000.
C. $48,000.
D. $102,400.

1. FIGURE 7-5Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.

   During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.

   Normal and actual activity (brochures made) are as follows:

	Brochure Center 1	Brochure Center 2
Normal activity (brochures)	1,200,000	800,000
Actual activity (brochures)	1,000,000	880,000

Refer to Figure 7-5. Support department costs NOT allocated to the two brochure centers are
A. $16,800.
B. $19,680.
C. $44,000.
D. $8,000.

1. A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows:

	Capacity Provided	Capacity Used
Department	in Hours	in Hours
A	400	320
B	240	320

Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are

Fixed	Variable

1. $40,000 $60,000
   B. $50,000 $60,000
   C. $40,000 $75,000
   D. $50,000 $75,000

1. A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows:

	Capacity Provided	Capacity Used
Department	in Hours	in Hours
XX	500	400
YY	300	400

Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used. The fixed and variable costs allocated to Department XX are

Fixed	Variable

1. $75,000 $112,500
   B. $75,000 $90,000
   C. $60,000 $112,500
   D. $60,000 $90,000

1. A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows:

	Capacity Provided	Capacity Used
Department	in Hours	in Hours
XX	500	400
YY	300	400

Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department XX are

Fixed	Variable

1. $75,000 $112,500
   B. $75,000 $90,000
   C. $60,000 $112,500
   D. $60,000 $90,000

1. If a support department’s costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department’s costs that should be allocated to other departments is
   A. $145,000.
   B. $75,000.
   C. $70,000.
   D. $5,000.

1. Basic guidelines that should be followed when allocating support department costs include
   A. actual costs should always be used for allocations.
   B. budgeted costs, not actual costs, should be allocated.
   C. service department costs should never be allocated at the beginning of the period.
   D. both a and b.

1. Fixed support department costs should be allocated based on
   A. current actual usage of service.
   B. current budgeted usage of service.
   C. practical capacity of user departments.
   D. all of the above.

1. Which of the following methods allocates support department costs?
   A. direct allocation method
   B. reciprocal allocation method
   C. sequential allocation method
   D. all of the above

1. The following information pertains to Famous Company:

	Support Departments	Producing Departments
	Personnel	Maintenance	Fabrication	Assembly
Budgeted overhead	$40,000	$72,000	$140,000	$160,000
Direct labor hours	2,000	2,500	8,000	10,000
Machine hours	–	–	12,000	8,000
Number of employees	4	5	15	25

Famous Company 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.

What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)
A. $14,400.
B. $48,000.
C. $28,800.
D. $38,160.

1. The following information pertains to Longboat Company:

	Support Departments	Producing Departments
	Personnel	Maintenance	Fabrication	Assembly
Budgeted overhead	$40,000	$72,000	$140,000	$160,000
Direct labor hours	2,000	2,500	8,000	10,000
Machine hours	–	–	12,000	8,000
Number of employees	4	5	15	25

Longboat Company 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. (Round amounts to dollars.)

If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be
A. $28.80.
B. $24.78.
C. $7.28.
D. $5.40.

1. Fairfield Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows:

	Building	Personnel	Dept. P1	Dept. P2
Space occupied	2,000 ft.	10,000 ft.	120,000 ft.	70,000 ft.
Employees	6	10	80	50

If Fairfield Company uses the direct allocation method, the ratio representing the portion of building costs allocated to Department P1 is
A. 190,000/202,000.
B. 2,000/120,000.
C. 120,000/202,000.
D. 120,000/190,000.

1. Evergreen Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.Data on direct department costs, number of employees, and space occupied are as follows:

	S1	S2	P1	P2
Direct dept. costs	$7,500	$11,000	$27,500	$30,000
Number of employees	10	5	20	25
Space occupied (sq. ft.)	1,000	500	1,500	2,500

If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is
A. 1,500/5,000.
B. 1,500/4,000.
C. 1,500/5,500.
D. 1,500/2,000.

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. Using the direct method, the cost of the Maintenance Department allocated to Department P1 is
A. $15,000.
B. $10,000.
C. $20,000.
D. $30,000.

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. Using the direct method, the cost of the Personnel Department allocated to Department P1 is
A. $2,250.
B. $4,500.
C. $2,132.
D. $2,700.

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to Department P1 is
A. $12,750.
B. $24,000.
C. $21,750.
D. $20,295.

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the Maintenance Department allocated to Department P1 is
A. $20,000.
B. $30,000.
C. $4,500.
D. $18,000.

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. What is the combined total department costs for the producing departments after allocation of the support departments?
A. $24,000
B. $34,500
C. $58,500
D. $26,000

1. Figure 7-6Golden Leaves 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:

	MD	PD	P1	P2
Standard service hours used	100	50	300	150
Number of employees	10	20	90	90
Direct labor hours	50	50	250	250

Refer to Figure 7-6. What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?
A. $37,250
B. $27,250
C. $25,000
D. $15,000

1. Andover,, 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:

Support department hours used:
Department L	12,000
Department M	4,000
Total hours	16,000
Support department costs:
Actual support department costs	$48,000
Budgeted fixed department costs	$20,000
Budgeted variable rate per hour	$2.50

Normal support department usage is 8,000 hours each for Department L and Department M. Assuming the direct method is used and the purpose is product costing, support department costs allocated to Department L are
A. $30,000.
B. $20,400.
C. $24,800.
D. $20,000.

1. Andover, 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:

Support department hours used:
Department X	12,000
Department Y	4,000
Total hours	16,000
Support department costs:
Actual support department costs	$48,000
Budgeted fixed department costs	$20,000
Budgeted variable rate per hour	$2.50

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. $36,400.
C. $40,000.
D. $36,000.

1. Astoria Savings & Loans of New York has three revenue-generating departments: Consumer accounts, Commercial accounts, and Loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below:

	Percentage of Service Used by
Dept.	Costs	Admin.	Pers.	Acctg.	Consumer	Comm’l	Loans
Administration	$40,000	–	10	10	40	20	20
Personnel	23,000	10	–	10	20	40	20
Accounting	30,000	10	10	–	20	20	40
Consumer	41,000
Commercial	25,000
Loans	16,000

How much cost would be allocated to the Commercial account area from administration using the direct method?
A. $40,000
B. $5,000
C. $10,000
D. $20,000

1. Which of the following allocation methods assumes “step-down” interdepartmental services?
   A. direct method
   B. sequential method
   C. reciprocal method
   D. all of the above

1. Which of the following would NOT be a criteria used to rank departments to determine order of allocation under the sequential method?
   A. Rank the supporting departments in order of the amount of service rendered, from the greatest to the least.
   B. Rank the supporting departments in order of the support services rendered, measured by the direct costs of each support department with the department with the highest cost rendering the greatest service.
   C. Determine the total cost of a support department, both direct and allocated from other support departments, before ranking.
   D. Rank the supporting departments based on a percentage of service they render to other service departments.

1. Lennon Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $6,000 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	100	50	300	150
Number of employees	5	10	45	45
Direct labor hours	50	50	250	250

Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

What is the overhead rate for Department X assuming the direct method is used?
A. $47.00
B. $82.00
C. $152.00
D. $164.00

1. Which of the following allocation methods fully recognizes services that support departments provide to each other?
   A. reciprocal method
   B. sequential method
   C. direct method
   D. all of the above

1. The Savings Bank of Sarasota has three revenue-generating departments: checking accounts, savings accounts, and loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below:

	Percentage of Service Used by
Dept.	Costs	Admin.	Pers.	Acctg.	Check.	Sav.	Loans
Administration	$40,000	–	10	10	40	20	20
Personnel	23,000	10	–	10	20	40	20
Accounting	30,000	10	10	–	20	20	40
Checking	41,000
Savings	25,000
Loans	16,000

The Savings Bank of Sarasota uses the sequential (step) method and the service departments are allocated in the following order: administration, personnel, and accounting. How much cost would be allocated to the loan area from the personnel department using the sequential/step method? (Round to two decimal places.)
A. $4,600.00
B. $6,000.00
C. $5,111.11
D. $7,666.67

1. Tec-Pro Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.Data on direct department costs, number of employees, and space occupied are as follows:

	S1	S2	P1	P2
Direct dept. costs	$7,500	$11,000	$27,500	$30,000
Number of employees	10	5	20	25
Space occupied (sq. ft.)	1,000	500	1,500	2,500

When Tec-Pro uses the sequential method, the support department allocated first is the one with the highest percentage of interdepartmental service. The choice of the department allocated first is determined by the comparison of the following ratio for S1 and S2, respectively:
A. 5/50; 1,000/5,000
B. 5/60; 1,000/5,500
C. 10/50; 1,000/5,000
D. 10/55; 500/4,500

1. McHugh Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows:

	Building	Personnel	Dept. P1	Dept. P2
Space occupied	2,000 ft.	10,000 ft.	120,000 ft.	70,000 ft.
Employees	6	10	80	50

If McHugh Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is
A. 50/130.
B. 90/140.
C. 50/140.
D. 50/146.

1. Rodriguez 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 Departments	Producing Departments
	A	B	C	D
Overhead costs	$20,000	$50,000	$90,000	$120,000
Square feet	2,000	2,400	4,000	12,000
Number of employees	20	30	60	40
Direct labor hours	–	–	10,000	6,400
Machine hours	–	–	6,000	10,800

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 sequential method of allocation is used and the company follows its usual pricing policy, the selling price of the product would be (round service allocations to the nearest whole dollar and the costs per unit to two decimal places)
A. $113.52.
B. $159.38.
C. $108.46.
D. $162.52.

1. Oxide 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 is S1’s cost equation?
   A. S1 = $8,000 + 0.10S2
   B. S1 = $8,000 + 0.06S2
   C. S1 = $15,000 + 0.10S2
   D. S1 = $15,000 + 0.06S2

1. Oxide 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 is S2’s cost equation?
   A. S2 = $8,000 + 0.10S1
   B. S2 = $8,000 + 0.06S1
   C. S2 = $15,000 + 0.10S1
   D. S2 = $15,000 + 0.06S1

1. Hunghi Company has three support departments whose direct department costs are $35,000, $45,000, and $55,000, respectively, and two producing departments whose direct department costs are $400,000 and $360,000, respectively. The combined total department cost for the producing departments after allocation of the support departments is
   A. $360,000.
   B. $760,000.
   C. $895,000.
   D. $135,000.

1. Howard Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.Data on direct department costs, number of employees, and space occupied are as follows:

	S1	S2	P1	P2
Direct dept. costs	$7,500	$11,000	$27,500	$30,000
Number of employees	10	5	20	25
Space occupied (sq. ft.)	1,000	500	1,500	2,500

If Howard used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is
A. S1 = $7,500 + 0.10S2.
B. S1 = $7,500 + 0.20S2.
C. S1 = $10,000 + 0.20S2.
D. S1 = $10,000 + 0.10S2.

1. Abound 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 S1?
   A. $15,573
   B. $800
   C. $9,500
   D. $15,000

1. Abound 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?
   A. $8,000
   B. $9,557
   C. $900
   D. $15,573

1. The following information pertains to Amon Schrock Corporation:

	Support Departments	Producing Departments
	Personnel	Maintenance	Fabrication	Assembly
Budgeted overhead	$80,000	$144,000	$280,000	$320,000
Direct labor hours	4,000	5,000	16,000	20,000
Machine hours	–	–	24,000	16,000
Number of employees	16	20	60	100

Amon Schrock 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
A. $28.80.
B. $24.78.
C. $7.28.
D. $5.40.

1. Ely Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $60,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	100	50	300	150
Number of employees	5	10	45	45
Direct labor hours	50	50	250	250

Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

What is the overhead rate for Department Y assuming the direct method is used?
A. $109.00
B. $120.00
C. $250.00
D. $218.00

1. Morton Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $27,000 and $45,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	200	150	1,200	600
Number of employees	25	50	75	75
Direct labor hours	250	250	1,000	500

Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

What is the overhead rate for Department X assuming the direct method is used?
A. $27.00
B. $81.00
C. $46.88
D. $93.75

1. Alliance Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $27,000 and $45,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	200	150	1,200	600
Number of employees	25	50	75	75
Direct labor hours	250	250	1,000	500

Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.

What is the overhead rate for Department Y assuming the direct method is used?
A. $90.00
B. $163.50
C. $187.50
D. $81.75

1. Santiago 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 Departments	Producing Departments
	A	B	C	D
Overhead costs	$20,000	$50,000	$90,000	$120,000
Square feet	2,000	2,400	4,000	12,000
Number of employees	20	30	60	40
Direct labor hours	–	–	10,000	6,400
Machine hours	–	–	6,000	10,800

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
A. $102.00.
B. $111.00.
C. $115.00.
D. $161.00.

1. Gravity 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:

	Maint. Dept.	Person. Dept.	Dept. P1	Dept. P2
Standard service hours used	400	200	1,200	600
Number of employees	20	40	180	180
Direct labor hours	200	200	1,000	1,000

What are the total overhead costs associated with P1 after allocating the Maintenance and Personnel Departments using the direct method?
A. $120,000
B. $125,000
C. $36,000
D. $18,000

1. Hotchkiss Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 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:

	Maint. Dept.	Person. Dept.	Dept. P1	Dept. P2
Standard service hours used	400	200	1,200	600
Number of employees	20	40	180	180
Direct labor hours	200	200	1,000	1,000

What are the total overhead costs associated with P2 after allocating the Maintenance and Personnel Departments using the direct method?
A. $48,000
B. $90,000
C. $94,500
D. $99,000

1. Diane’s Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	100	75	600	300
Number of employees	50	100	150	150
Direct labor hours	125	125	500	250

What are the total overhead costs associated with Department X after allocating the Maintenance and Personnel Departments using the direct method?
A. $31,250
B. $29,000
C. $11,250
D. $9,000

1. Diane’s Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively.Data on standard service hours and number of employees are as follows:

	Maint.	Person.	Dept.	Dept.
	Dept.	Dept.	X	Y
Standard service hours used	100	75	600	300
Number of employees	50	100	150	150
Direct labor hours	125	125	500	250

What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?
A. $15,000
B. $27,250
C. $25,000
D. $17,250

1. Julius Manufacturing prices its products at full cost plus 30 percent. The company operates two support departments and two producing departments. Budgeted costs and normal activity levels are as follows:

	Support Departments	Producing Departments
	A	B	C	D
Overhead costs	$40,000	$100,000	$180,000	$240,000
Square feet	1,000	1,200	2,000	6,000
Number of employees	20	30	60	40
Direct labor hours	–	–	10,000	6,400
Machine hours	–	–	6,000	10,800

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 $180 per unit, and direct labor is $80 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
A. $260.00.
B. $431.60.
C. $468.00
D. $332.00.

1. Products with substantial value which are produced simultaneously by the same process up to a split-off point are called:
   A. Joint products
   B. Minor products
   C. By-products
   D. Both a and b

1. The cost of crude oil used in producing gasoline products is an example of
   A. joint costs.
   B. a by-product.
   C. joint products.
   D. common cost allocation.

1. Joint costs are
   A. separable.
   B. allocated on the basis of cause and effect relationships.
   C. allocated arbitrarily.
   D. all of the above.

1. The split-off point can best be defined as
   A. the point at which a secondary product is recovered in the course of manufacturing a primary product.
   B. the point at which joint products become separate and identifiable.
   C. the point in the production process where no further processing is needed.
   D. the point at which you can get more of one product and less of another product.

1. Joint costs are allocated because of
   A. financial reporting requirements.
   B. tax reporting requirements.
   C. IMA requirements.
   D. both b and a.

1. A secondary product recovered in the course of manufacturing a primary product during a joint process is called a:
   A. main product
   B. joint product
   C. by-product
   D. both a and c

1. Which of the following is a by-product?
   A. lumber
   B. fresh fish
   C. whole milk
   D. sawdust

1. Which of the following would generally be a by-product?
   A. canned fish
   B. hamburger
   C. cow hides
   D. pineapples

1. Which of the following methods allocates joint production costs based on the pounds of product produced?
   A. sales-value-at-split-off method
   B. physical units method
   C. constant gross margin percentage method
   D. replacement cost method

1. A joint cost allocation method that would assign the same amount of cost per unit to two joint products that sell for $10 and $40, respectively, is the
   A. sales-value-at-split-off method.
   B. direct allocation method.
   C. net realizable value method.
   D. physical unit method.

1. Which joint cost allocation method is described by the following statement?Joint cost is prorated to the products on the basis of each product’s share of units.
   A. physical units method
   B. weighted average method
   C. sales-value-at-split-off method
   D. net realizable value method

1. Laredo Corporation, which manufactures products W, X, Y, and Z through a joint process costing $24,000, has the following data for 2014:

		Total Sales Value
Product	Units Produced	at Split-Off
W	10,000	$5,000
X	6,000	2,500
Y	16,000	3,000
Z	8,000	4,500

What is the amount of joint costs assigned to product W using the physical units method?
A. $6,000
B. $8,000
C. $16,000
D. $18,000

1. Restaurant 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?
   A. $-0-
   B. $10,000
   C. $25,000
   D. $15,000

1. 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 and sold. 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 is the gross profit of product Y assuming the physical units method is used?
   A. $25,000
   B. $-0-
   C. $10,000
   D. $15,000

1. Which joint cost allocation method is described by the following statement?Each product is assigned a weighting factor which is multiplied by the number of units. Joint cost is prorated to the products on the basis of each product’s share of total weighted units.
   A. physical units method
   B. weighted average method
   C. sales-value-at-split-off method
   D. net realizable value method

1. Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000:

Grade	Board Feet	Final Sales Value
First and second	75,000	$ 56,250
No. 1 common	200,000	180,000
No. 2 common	100,000	105,000
No. 3 common	125,000	127,500

What amount of joint costs will be allocated to first and second using the physical units method?
A. $300,000
B. $45,000
C. $36,000
D. $225,000

1. Impacto Corporation produces four products in a joint process for $650,000. The following information is available on total sales and production in units:

Products	Sales	Production
I	1,000	4,000
L	2,000	5,000
E	3,000	7,000
S	4,000	8,000

What amount of joint costs will be allocated to I based on the physical units method?
A. $100,000
B. $650,000
C. $108,355
D. $300,000

1. The sales-value-at-split-off method allocates joint production costs based on each product’s share of
   A. sales value revenues have not been realized at the split-off point.
   B. costs realized at the split-off point.
   C. final sales value less further processing costs after the split-off point.
   D. units produced at the split-off point.

1. Hibernation Company incurred $500,000 to manufacture the following products in a joint process:

			Selling Price
Product	Units Produced	Weight per Unit	per Unit
I	1,250	8 lbs.	$ 5
J	2,500	6 lbs.	10
K	3,750	4 lbs.	10
L	5,000	2 lbs.	5

How much joint cost would be allocated to Product I based on the physical units method?
A. $50,000
B. $450,000
C. $33,333
D. $500,000

1. Cumadin Corporation, which manufactures products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2014:

		Sales Value
Product	Units Produced	at Split-Off
W	10,000	$5,000
X	6,000	2,500
Y	16,000	3,000
Z	8,000	4,500

What is the amount of joint costs assigned to Product X using the sales-value-at-split-off method?
A. $18,000
B. $3,000
C. $10,000
D. $2,700

1. Cumadin Corporation, which manufactures Products W, X, Y, and Z through a joint process costing $18,000, has the following data for 2014:

		Sales Value
Product	Units Produced	at Split-Off
W	10,000	$5,000
X	6,000	2,500
Y	16,000	3,000
Z	8,000	4,500

What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?
A. $3,600
B. $7,200
C. $18,000
D. $1,200

1. Foster Company incurred $200,000 to manufacture the following products in a joint process:

			Selling Price
Product	Units Produced	Weight per Unit	per Unit
I	500	8 lbs.	$ 5
J	1,000	6 lbs.	10
K	1,500	4 lbs.	10
L	2,000	2 lbs.	5

How much joint cost would be allocated to Product K based on the total sales value method?
A. $13,334
B. $80,000
C. $26,666
D. $60,000

1. Suppose that a Plywood manufacturer processes wood pulp into four grades of Plywood totaling 500,000 board feet as follows at a joint cost of $450,000:

Grade	Board Feet	Final Sales Value
First and second	75,000	$ 56,250
No. 1 common	200,000	180,000
No. 2 common	100,000	105,000
No. 3 common	125,000	127,500

What amount of joint costs will be allocated to No. 1 common using the final sales value method?
A. $172,800
B. $450,000
C. $80,000
D. $24,000

1. Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?
   A. sales-value-at-split-off method
   B. net realizable value method
   C. physical units method
   D. replacement cost method

1. Algonquin 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 net realizable value net realizable value method?
   A. $11,765
   B. $40,000
   C. $39,000
   D. $13,636

1. Algonquin 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 is the gross profit of product Y assuming the net realizable value method is used?
   A. $45,000
   B. $16,364
   C. $13,636
   D. $30,000

1. Which of the following methods allocates a joint cost such that each product has the same cost of goods sold percentage?
   A. constant gross margin percentage method
   B. net realizable value method
   C. physical units method
   D. replacement cost method

1. 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.
   A. constant gross margin method
   B. weighted average method
   C. sales-value-at-split-off method
   D. net realizable method

1. Figure 7-7Garden of 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 Brights using the net realizable value method?
   A. $11,446
   B. $11,906
   C. $50,000
   D. $-0-

1. Figure 7-7Garden of 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 gross profit for Brights assuming the physical units method is used?
   A. $62,500
   B. $12,500
   C. $37,500
   D. $47,500

1. Figure 7-7Garden of 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 gross profit for Brights assuming the net realizable value method is used?
   A. $36,054
   B. $11,446
   C. $47,500
   D. $62,500

1. Figure 7-7Garden of 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 physical units method?
   A. $50,000
   B. $160,000
   C. $38,554
   D. $40,000

1. Figure 7-7Garden of 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?
   A. $15,000
   B. $10,000
   C. $50,000
   D. $40,000

1. Figure 7-7Garden of 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 gross profit for Dulls assuming the constant gross margin percentage method is used?
   A. $120,000
   B. $150,000
   C. $37,500
   D. $200,000

1. Carson Wood Products processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000:

Grade	Board Feet	Final Sales Value
First and second	75,000	$ 56,250
No. 1 common	200,000	180,000
No. 2 common	100,000	105,000
No. 3 common	125,000	127,500

What amount of joint costs will be allocated to No. 2 common using the constant gross margin percentage method?
A. $300,000
B. $67,200
C. $37,800
D. $192,000

1. Carson Wood Products processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000:

Grade	Board Feet	Final Sales Value
First and second	75,000	$ 56,250
No. 1 common	200,000	180,000
No. 2 common	100,000	105,000
No. 3 common	125,000	127,500

What is the gross profit of No. 3 common if the constant gross margin percentage method is used?
A. $135,000
B. $81,600
C. $45,900
D. $168,750

1. Some support departments typically found in manufacturing and nonmanufacturing organizations are as follows:Cafeteria
   Personnel
   Maintenance
   Purchasing
   Accounting

   Required:

   For each of the preceding support departments, indicate potential bases that could be used to allocate costs to the producing departments.

1. Describe the differences between support and producing departments. Give three examples of each.

1. Consequence Printing operates a Graphics business at two different locations. Consequence Printing has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each Graphics Center on the basis of total prints made.During the first month, the costs of the support department were expected to be $100,000. Of this amount, $30,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $64,000 and actual fixed costs of $36,000.

   Normal and actual activity (prints made) are as follows:

	Graphics Center 1	Graphics Center 2
Normal activity (graphics)	3,000,000	2,000,000
Actual activity (graphics)	2,500,000	2,200,000

Required:

a.	For purposes of performance evaluation, calculate the fixed costs allocated to Graphics Center 1.
b.	For purposes of performance evaluation, calculate the fixed costs allocated to Graphics Center 2.
c.	Calculate the support department costs not allocated to the two Graphics Centers.

1. Silver Chariots Trucking Company incurred $5,000 of indirect advertising costs for its operations. The following data have been collected for 2014 for its three departments:

	New Trucks	Used Trucks	Parts and Service
Sales	$50,000	$35,000	$15,000
Direct advertising costs	$2,500	$2,000	$500
Newspaper ad space	60%	35%	5%

Required:

Determine the costs assigned to each department using the following activity drivers:

a.	Sales
b.	Direct advertising costs
c.	Newspaper ad space

1. Citizens Bank has two bank locations: Main and Suburbs. The central office provides check-processing services for the two banks. Information pertaining to the banks is as follows:

	Check Processing	Main	Suburbs
Budgeted fixed costs	$100,000	–	–
Budgeted variable rate per hour	$20	–	–
Normal usage in hours	–	600	400
Actual fixed costs	$107,500	–	–
Actual variable costs	$ 17,500	–	–
Actual usage in hours	–	550	250

Required:

a.	Use the direct method to allocate the check-processing center costs to each bank to provide information for setting service charges.
b.	Use the direct method to allocate the check processing center costs to each bank for performance evaluation purposes.
c.	Determine the costs of the check-processing center NOT allocated to the two banks. Why were these costs not allocated to the operating units?

1. Describe the differences between the direct, sequential and reciprocal methods of allocating support department costs to production departments.

1. Arctic Tundra Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Estimated direct costs and percentages of services used by these departments are as follows:

	Used by Department
Support Dept.	S1	S2	P1	P2
S1	–	10%	40%	50%
S2	20%	–	50%	30%
Direct costs	$4,500	$8,000	$10,000	$15,000

Required:

a.	Prepare a schedule allocating the support department costs to the producing departments using the direct allocation method.
b.	Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method.

1. Albemarle, 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:

	2011
Support department hours used:
Department X	8,000
Department Y	16,000
Total hours	24,000
Support department costs:
Actual support department costs	$72,000
Budgeted fixed service center costs	$24,000
Budgeted variable rate per hour	$3.00

Normal support department usage is 12,000 hours each for Department X and Department Y.

Required:

a.	Assuming the purpose is product costing, allocate the costs of the support department using the direct method.
b.	Assuming the purpose is to evaluate performance, allocate the costs of the support department.

1. Chrome 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:

	Services Provided to
Services Provided from	S1	S2	A	B
S1	–	8%	74%	18%
S2	21%	–	47%	32%

Total department costs for the support and producing departments are as follows:

S1	$ 58,000
S2	124,000
A	712,000
B	568,000

Required:

Find the amount of total costs for A and B using the reciprocal method.

1. Eagle Company applies factory overhead in its two producing departments using a predetermined rate based on budgeted machine hours in the Blending Department and based on budgeted labor hours in the Containerizing Department. Variable cafeteria costs are allocated to the producing departments based on budgeted number of employees, and fixed costs are allocated based on the capacity number of employees. Variable maintenance costs are allocated on the budgeted number of direct labor hours, and fixed costs are allocated on labor hour capacity. The data concerning next year’s operations are as follows:

	Support Departments	Producing Departments
Budgeted costs:	Cafeteria	Maintenance	Blending	Containerizing
Variable costs	$60,000	$84,000	$300,000	$324,000
Fixed costs	18,000	30,000	120,000	140,000

Other data:
Direct labor hours (capacity)	10,000	20,000
Direct labor hours (budgeted)	8,000	16,000
Number of employees (capacity)	30	60
Number of employees (budgeted)	20	40
Machine hours (capacity)	33,000	66,000
Machine hours (budgeted)	20,000	60,000

Required:

a.	Prepare a schedule showing the allocation of budgeted support department costs to producing departments.
b.	Determine the predetermined overhead rate for the producing departments.

1. McDuff Company uses a job-order costing system to compute product costs. There are two producing departments (P1 and P2) and two support departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor hours, and the production departmental overhead rates are also based on direct labor hours. The following data are available for a recent period:

	S1	S2	P1	P2
Direct department costs	$12,000	$18,000	$70,000	$117,500
Number of employees	8	12	48	72
Direct labor hours	450	325	2,250	1,800

Required:

a.	Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method. The department with the greatest percentage of interdepartmental services should be allocated first.
b.	Determine the overhead rates per direct labor hour for P1 and P2.
c.	Job A2 was completed during the period at a cost of $26,000 for direct materials and direct labor costs. This job required 21 direct labor hours in Department P1 and 15 direct labor hours in Department P2. What was the total cost of Job A2?