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1
Which of the following is NOT a strategic role of cost allocation?
A)Determine the competitive market price.
B)Determine accurate departmental and product costs.
C)Motivate managers to exert a high level of effort to achieve the goals of top management.
D)Provide the right incentive for managers to make decisions that are consistent with the goals of top management.
E)Fairly determine the rewards earned by the managers for their effort and skill and for the effectiveness of their decision making.
2
One of the ethical issues pertaining to cost allocation is the effect of the chosen allocation method on the costs of products sold to or from foreign subsidiaries. Which method(s) would most likely be accepted by international tax authorities?
A)allocations based on sales
B)allocations based on tax rates
C)allocations based on labor costs
D)All of the above are correct.
E)Only A and C are correct.
3
Which of the following is NOT one of the three types of overhead allocation?
A)Direct approach
B)Departmental approach
C)Backflush approach
D)Activity-based costing approach
4
Gordon Manufacturing Company has two service departments, S1 and S2, and two producing departments, P1 and P2. Additionally it has the following information pertaining to the current year:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025532/966304/ch7_q4_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>

How much will be allocated to P1 from S2 assuming the direct method is being used to allocate service department costs?
A)$60,000
B)$54,000
C)$81,333
D)$30,000
5
Gordon Manufacturing Company has two service departments, S1 and S2, and two producing departments, P1 and P2. Additionally it has the following information pertaining to the current year:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025532/966304/ch7_q5_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>

How much will be allocated to P1 from S2 assuming the step method is being used to allocate service department costs? Allocate S1 first.
A)$60,000
B)$54,000
C)$81,333
D)$30,000
6
Gordon Manufacturing Company has two service departments, S1 and S2, and two producing departments, P1 and P2. Additionally it has the following information pertaining to the current year:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025532/966304/ch7_q6_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>

What is the formula for calculating the allocated S1 costs assuming that the reciprocal method is being used to allocate service department costs?
A)S1 = $90,000 + (0.2 x S2)
B)S1 = $160,000
C)S1 = $160,000 + (0.2 x S2)
D)S1 = $160,000 + (0.1 x S2)
7
Gordon Manufacturing Company has two service departments, S1 and S2, and two producing departments, P1 and P2. Additionally it has the following information pertaining to the current year:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025532/966304/ch7_q7_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>

What is the formula for calculating the allocated S2 costs assuming that the reciprocal method is being used to allocate service department costs?
A)S2 = $90,000 + (0.2 x S1)
B)S2 = $90,000
C)S2 = $90,000 + (0.1 x S1)
D)S2 = $160,000 + (0.1 x S1)
8
Gordon Manufacturing Company has two service departments, S1 and S2, and two producing departments, P1 and P2. Additionally it has the following information pertaining to the current year:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025532/966304/ch7_q8_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>

What is the total amount of costs to be allocated from S2 assuming that the reciprocal method is being used to allocate service department costs?
A)$90,000
B)$172,449
C)$124,490
D)$160,000
9
An overhead cost that cannot be traced directly to either a service or production department:
A)is called a discretionary cost.
B)requires allocation using an appropriate method.
C)is charged directly to that department.
D)must be variable.
E)must be fixed.
10
When implementing the departmental allocation approach, dual allocation is:
A)the use of budgeted rather than actual amounts.
B)the separation of variable and fixed costs.
C)the allocating of costs exceeding the outside purchase price.
D)both A and B.
11
Service department allocations apply to:
A)manufacturing organizations.
B)service organizations.
C)not-for profit organizations.
D)All of the above are correct.
E)Only A and B are correct.
12
Jimmie Products manufactures two products, X and Y, in a joint process. The products incur $180,000 in joint costs and produce 20,000 pounds of X and 60,000 pound of Y in each batch. Once the batch is completed, X and Y can be sold for $4 and $2 per pound respectively at split-off. Otherwise, X can incur an additional $30,000 to finish the product. In order to finish Y an additional $60,000 will need to be added. X and Y can be sold when finished for $8 and $4 per pound, respectively.

What will be X's total costs assuming that the physical units method is used to allocate joint costs and that X has the additional processing?

A)$45,000
B)$60,000
C)$75,000
D)$75,484
13
Jimmie Products manufactures two products, X and Y, in a joint process. The products incur $180,000 in joint costs and produce 20,000 pounds of X and 60,000 pound of Y in each batch. Once the batch is completed, X and Y can be sold for $4 and $2 per pound respectively at split-off. Otherwise, X can incur an additional $30,000 to finish the product. In order to finish Y an additional $60,000 will need to be added. X and Y can be sold when finished for $8 and $4 per pound, respectively.

What will be Y's total costs assuming that the sales value at split-off method is used to allocate joint costs and that Y has the additional processing?

A)$168,000
B)$108,000
C)$102,000
D)$270,000
14
Jimmie Products manufactures two products, X and Y, in a joint process. The products incur $180,000 in joint costs and produce 20,000 pounds of X and 60,000 pound of Y in each batch. Once the batch is completed, X and Y can be sold for $4 and $2 per pound respectively at split-off. Otherwise, X can incur an additional $30,000 to finish the product. In order to finish Y an additional $60,000 will need to be added. X and Y can be sold when finished for $8 and $4 per pound, respectively.

What will be the amount of joint cost allocated to X assuming that the net realizable value (NRV) method is used to allocate joint costs?

A)$45,000
B)$60,000
C)$75,000
D)$75,484
15
By-product costing that uses the revenue method(s) recognize:
A)expense recognition in the current period.
B)an income recognition at the time of sale.
C)an inventory value in the period in which the by-product is produced.
D)None of the above answers is correct.





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