Question : 11) Both fixed and variable costs allocated according to capacity : 1186029

 

11) Both fixed and variable costs are allocated according to capacity used. The fixed and variable costs allocated to the Barbell Department are

A) $30,000 and $50,000, respectively.

B) $30,000 and $60,000, respectively.

C) $30,000 and $75,000 respectively.

D) $40,000 and $60,000, respectively.

E) $60,000 and $40,000, respectively.

 

12) Both fixed and variable costs are allocated according to capacity used. The fixed and variable costs allocated to the Sauna Department are

A) $30,000 and $50,000, respectively.

B) $30,000 and $60,000, respectively.

C) $30,000 and $75,000 respectively.

D) $40,000 and $60,000, respectively.

E) $60,000 and $40,000, respectively.

 

13) An advantage to using budgeted usage, rather than actual usage, for the allocation base is that

A) GAAP/IFRS requires it for comparability to previous years.

B) variable costs are lower.

C) management does not have to be accountable for actual costs since the system only deals with budgeted costs.

D) it is consistent with a short-run time horizon.

E) user divisions will know their allocated costs in advance.

 

14) A disadvantage of allocating fixed costs according to actual usage is that

A) managers may be tempted underestimate usage.

B) the allocation would capture the cause-and-effect relationship.

C) variation in usage will result in variances that need to be managed.

D) changes in one department’s usage should not affect another department’s allocation.

E) some organizations offer rewards to managers who make accurate forecasts.

15) Which of the following could be described as a department that adds value to a product or service, which is observable by a customer?

A) a personnel department

B) an assigned department

C) a support department

D) a service department

E) an operating department

 

16) Which of the following does NOT apply to support departments?

A) A support department is not an operating department.

B) Support departments create special accounting problems when they provide reciprocal support to each other.

C) An example of a support department would be a personnel department.

D) To obtain accurate product costs requires the inclusion of support department costs.

E) Direct support costs are always traced, indirect support department costs are allocated.

 

17) To discourage unnecessary use of a support department, management might

A) not allocate any support department costs to user departments.

B) allocate support department costs based upon user department usage.

C) allocate a fixed amount of support department costs to each department regardless of use.

D) issue memos on useful services provided by the support department.

E) allocate only variable costs based on budgeted usage.

 

18) Correl Company’s power plant provides electricity for its two operating departments, A and B. The year 2010 budget for the power plant shows:

 

Budgeted fixed costs$80,000

Budgeted variable costs

per kilowatt hour (kwh)$0.20

Additional data for 2008:

 

BudgetActual

(kwh)(kwh)

Department A240,000215,000

Department B160,000195,000

 

Actual power-plant costs:  Fixed $92,000,  variable $88,000

 

Required:

a.Compute the budgeted power-plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.

b.Compute the budgeted power-plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.

c.From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?

 

 

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