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Multiple Choice Quiz
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1
Which of the following would be considered a service department for an airline?
A)Human Resources
B)Accounts Payable
C)Information Technology
D)Ticket Processing
E)All of the above
2
Willow Corporation has three service departments (Human Resources, Maintenance and Accounting) and two production departments (Assembly and Finishing). Willow's three service departments provide services to the two production departments and to each of the other service departments. Of the three service departments, Human Resources is the largest provider of services. Which of the following allocations could happen assuming that Willow uses the step down method of cost allocation?
  1. Maintenance to Finishing
  2. Accounting to Human Resources
  3. Finishing to Assembly
  4. Human Resources to Accounting
A)(i), (ii), (iii) and (iv) could happen
B)(i), (ii) and (iv) could happen
C)(i) and (iv) could happen
D)only (i) could happen
E)None of the above answers adequately explains the possible allocations.
3
American Auto operates a large regional auto dealership. American has two main revenue generating operating departments, Auto Sales (new and used) and Auto Service and four service departments which support operations. American provides you with the following data regarding their service department cost allocation:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856750/Ch17_q3.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"> (60.0K)</a>
Human Resources, Admin and Accounting and the Maintenance department all provided services to other service departments as well as to the operating departments that they support. Assume that Human Resources is the largest provider of services.

Use the direct method of service department cost allocation and determine the amount of the maintenance department costs that will be charged to the Sales Department.
A)$360,000
B)$160,237
C)$199,763
D)$152,013
E)None of the above
4
Which method of service department cost allocation accounts for the mutual provision of reciprocal services among all service departments?
A)Direct method.
B)Dual cost method.
C)Reciprocal-services method.
D)Joint-cost method.
E)Both (A) and (D).
5
Which method of service department cost allocation allocates variable costs in proportion to short-run usage and allocates fixed costs in proportion to long-run usage?
A)Direct method.
B)Joint-cost method.
C)Reciprocal-services method.
D)Dual cost allocation.
E)Both (C) and (D).
6
Which method of service department cost allocation provides the more accurate method of department cost allocation and does not ignore the fact that some service departments may perform services for other service departments?
A)Direct method.
B)Step-down method.
C)Reciprocal-services method.
D)Joint cost allocation.
E)None of the above
7
When budgeted service department costs are allocated to production departments (much like the allocation of manufacturing overhead to the Work in Process account), any variance between allocated budgeted costs and actual costs is called a variance. Which is the correct way to dispose of this variance?
A)Allocate it among the production departments on some basis.
B)Close it to the Cost of Goods Sold account.
C)Close it against the period's income.
D)Close it to the Work-in-Process account.
E)Allocate between the Work-in-Process account and the Finished Goods account.
8
Which of the following statements is true?
A)Under the two-stage allocation of department overhead, departments play a key role as intermediate cost objects.
B)Under an ABC approach to department overhead, activities play a key role as intermediate cost objects.
C)The breakdown of costs by activity in an ABC system is much finer than a breakdown by departments.
D)All of the above are true.
E)Only (A) and (B) are true.
9
Which of the following statements is true?
A)A joint production process results in two or more products.
B)The point at which joint products are sold is called the split-off point.
C)Joint costs are the costs associated with joint products after the split-off point.
D)The separable cost of processing is the cost of converting a raw material into joint products.
E)Both (A) and (C) are true
10
Which method of joint cost allocation allocates the joint cost to the joint products in proportion to the net realizable value of each joint product?
A)Net-realizable-value method.
B)Physical-units method.
C)Relative-sales-value method.
D)Physical-value method.
E)By-products-value method.
11
Which method of joint cost allocation allocates the joint cost to the joint products in proportion to their physical quantities?
A)Net-realizable-value method.
B)Physical-units method.
C)Relative-sales-value method.
D)Physical-value method.
E)Relative-gross-profit method.
12
Consider the following:
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Joint product costs are $45,000. Use the physical-units method of joint product cost allocation and determine the joint product cost allocated to Joint Product A at the split-off point.
A)$ 9,000
B)$18,000
C)$27,000
D)$40,000
E)$23,000
13
Consider the following:
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Joint product costs are $45,000. Use the relative-sales value method of joint product cost allocation and determine the joint product cost of Product A at the split-off point.
A)$18,000
B)$14,143
C)$14,500
D)$15,400
E)$21,600
14
Consider the following:
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Joint product costs are $45,000. Use the net-realizable-value method of joint product cost allocation and determine the joint product cost of Product A at the split-off point.
A)$30,857
B)$14,443
C)$14,143
D)$18,500
E)$14,150
15
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856416/ch17_15.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"> (16.0K)</a>
Using the net-realizable-value method, determine the dollar amount of joint cost allocated to Joint Product B.
A)$2,101
B)$1,100
C)$1,020
D)$1,300
E)$2,700





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