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Exam 19: Support Department and Joint Cost Allocation

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Question 31

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Support department costs are normally accounted for as which of the following responsibility center classifications?

A) profit center
B) revenue center
C) investment center
D) cost center

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

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Question 32

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The physical units method and the weighted average method are the only two common methods for allocating joint costs.

A) True
B) False

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Question 33

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The sequential method of allocating support department costs to production using the ABC method is the easiest and most accurate.

The sequential method of allocating support department costs to production departments using ABC ignores the reality that some support departments may also serve other support departments.

McBride's Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at the split-off point. The amount of this cost that will be allocated to cream using the physical units method is

The physical units method of joint cost allocation uses market values in the allocation process.

An example of the split-off point in dairy production is that point where raw milk is

The following scenarios are encountered by Cooper Industries in several production facilities around the country. As the managerial accountant, you are asked to choose an appropriate support department cost allocation method. Indicate whether the scenario warrants the use of a single plantwide rate, multiple production department rates, or activity-based costing. Use each method only once.a.Single plantwide rate b.Multiple production department rates c.Activity-based costing -Scenario 1: Cooper Industries has a plant in Ohio that has three support departments and four production departments that manufacture four simple products, one in each department. This plant employs 75 people in the production facility and has two 8-hour shifts running five days a week.

It is sometimes difficult, if not impossible, to find an appropriate cost driver for applying support department costs.

The sequential method of allocating support department costs to production departments using ABC is also known as the step-down method.

The final step in using activity-based costing to apply overhead to products is applying production activity costs to products using cost drivers for each production activity.

When using a single plantwide overhead rate, support department costs are separated from all other overhead costs in the application process.

Using the reciprocal services method, which of the following equations represents the algebraic expressions for the two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $350,000 of direct costs but also 30% of the Maintenance Department (M) cost and the Maintenance Department that includes not only $50,000 of direct costs but also 50% of the Janitorial Department?

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

Which of the following is the most difficult but most accurate of the commonly used methods for allocating support department costs to production departments?

Which of the following statement is false?

The following is a list of various departments in a diesel engine manufacturing/rebuilding facility. The company makes diesel engines for the locomotive industry. It also remanufactures its own previously built engines that need to be overhauled after several years of use. Classify each department below as either a support department or a production department.a.Support b.Production -Engine Department-builds new engines

Using the performance report for Scotland Beauty Products (including support department and joint cost allocations), evaluate the performance of Michelle Tallerico compared to Lorie Osho. What important items stand out regarding the performance of the departments compared to each other?

Using the reciprocal services method, which of the following equations represents the correct algebraic expression needed to capture the total costs of a Janitorial Department (J) that includes $350,000 of direct costs and 30% of the Maintenance Department (M) cost and the Maintenance Department that includes $50,000 of direct costs and 50% of the Janitorial Department? (Hint: This equation is derived from the two separate equations representing each department's costs.)

Which of the following is a true statement with regard to the terms used when referring to manufacturing costs and the transfer of these costs to departments and products?