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Exam 7: Allocating Costs of Support Departments and Joint Products

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Question 81

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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.

E) A) and B)
F) A) and C)

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Question 82

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

A) True
B) False

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Question 83

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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? SUPPORTING CALCULATIONS: Joint cost allocation (6,000/10,000 × $25,000) = $15,000 Gross profit [(6,000 × $7.50) - $20,000 - $15,000] = $10,000

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.

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: 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

Which of the following allocation methods fully recognizes services that support departments provide to each other?

Which of the following cost categories would most likely use machine hours as its activity driver?

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

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: If Evergreen uses the direct method, the ratio representing the portion of Department S2 allocated to P1 is

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.

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

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

Departmental is applied to products passing through the department.

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

Which of the following departments is NOT a support department?

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: What amount of joint costs will be allocated to No. 1 common using the final sales value method?

Which of the following methods allocates support department costs?

Which of the following would generally be a by-product?

The major objective(s) of allocations are

The method of allocating costs assumes "step down" interdepartmental services.