Question :
Answer the following questions using the information below:
The Cold Spring : 1216987
Answer the following questions using the information below:
The Cold Spring Harbor Corporation currently leases a corporate suite in an office building for a cost of $180,000 a year. Only 70% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 30% of the suite and increase the overall costs of maintaining the space by $20,000.
6) If the stand-alone method were used, what amount of cost would be allocated to the start-up business?
A) $20,000
B) $54,000
C) $60,000
D) $74,000
7) If the incremental method were used, what amount of cost would be allocated to the start-up business?
A) $20,000
B) $54,000
C) $60,000
D) $74,000
8) The stand-alone method of allocating common costs emphasizes fairness and equity among users.
9) Under the incremental method, the first incremental user usually receives the highest allocation of the common costs.
10) A common cost is a cost of operating a facility or activity that is shared by two or more users.
11) Allocating common costs is clear-cut and can best be achieved by using the stand-alone cost-allocation method.
12) The stand-alone cost allocation method ranks the individual users of a cost object in order of users most responsible for a common cost and then uses these rankings to allocate the costs among the users.
13) The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.
14) The Maintenance Department has been servicing Gizmo Production for four years. Beginning next year, the company is adding a Scrap-Processing Department to recycle the materials from Gizmo Production. As a result, maintenance costs are expected to increase from $480,000 per year to $500,000 per year. The Scrap-Processing Department will use 25% of the maintenance efforts.
Required:
a.Using the stand-alone cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
b.Using the incremental cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
15) The Product Data Center has been servicing the Struble Production Casting Department for five years. Beginning next year, the company is adding a Production Molding Department to compliment the materials produced by the Struble Production Casting Department. As a result, data center costs are expected to increase from $700,000 per year to $800,000 per year. The Production Molding Department will use 20% of the data center efforts.
Required:
a.Using the stand-alone cost-allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year.
b.Using the incremental cost-allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year.
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