Deck 19: Support Department and Joint Cost Allocation

Question 1

When a single plantwide overhead rate is used to apply overhead to products, support department costs are included with all other overhead costs and are applied using a single cost driver.

Answer 1

True

Question 2

Support departments incur direct costs such as the cost of wages and salaries for employees who work in a machine maintenance department.

Answer 2

True

Question 3

Because support department costs are directly related to production, they are easily applied to products.

Answer 3

False

Question 4

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

Question 5

Support departments are sometimes called service departments because they provide services to other departments.

Question 6

Support departments are sometimes called production departments because the two terms mean the same thing.

Question 7

It is more accurate to ignore support department costs when determining product costs.

Question 8

Support departments are normally accounted for as an investment center.

Question 9

When using multiple production department rates, there is a maximum of one support department per production process.

Question 10

The Maintenance Department that services machines used in the production process is an example of a support department.

Question 11

If a company considers support department costs to be facility-level costs, product costs may be inaccurate because certain products use support department services more heavily than others.

Question 12

Because support department costs are indirectly related to production, they are applied to products as part of overhead.

Question 13

The goal of using any overhead rate is to apply all production costs to the product.

Question 14

In the process of applying overhead using multiple production department rates, overhead costs are directly traced to support and production departments and are then allocated to production departments based on the amount of support activity used by each department.

Question 15

Because support department costs are directly related to production, they are applied to product costs as a part of direct labor.

Question 16

When using multiple production department rates, all overhead costs are allocated to production departments and none of them are directly traced to support departments.

Question 17

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

Question 18

A support department provides a necessary service to produce a product.

Question 19

Overhead can be applied to products using one of three different methods: single plantwide rate, multiple production department rates, and activity-based costing.

Question 20

A major drawback to using a single plantwide rate is that it is applied using a single driver for all overhead costs and it is unlikely that the driver is appropriate for every type of overhead.

Question 21

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.

Question 22

Joint costs are inseparable after the split-off point.

Question 23

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.

Question 24

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

Question 25

In activity-based costing, support department costs are referred to as support activity costs.

Question 26

The direct, sequential, and reciprocal services methods of allocating support department costs to production departments using ABC require a six-step process.

Question 27

Under the sequential method of allocating support department costs to production departments using ABC, support department costs are allocated back to support departments from which costs have already been allocated.

Question 28

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

Question 29

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

Question 30

The reciprocal services method of allocating support department costs to production using the ABC method is the most difficult and most accurate method.

Question 31

When using ABC to allocate overhead, there are only two commonly used methods: the direct method and the sequential method.

Question 32

Under the reciprocal method of allocating support department costs to production departments using ABC, any inter-support-department usages are ignored.

Question 33

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

Question 34

Under the reciprocal services method of allocating support department costs to production departments using ABC, all inter-support-department services are considered in the allocation process.

Question 35

The reciprocal services method of allocating support department costs to production using the ABC method is the easiest and least accurate.

Question 36

Under the direct method of allocating support department costs to production departments using ABC, all support department costs are allocated directly to production departments.

Question 37

One of the reasons that James Company needs to estimate the costs of its joint products is to determine selling prices for them.

Question 38

The process for allocating support activity costs with activity-based costing is similar to that used with a single plantwide rate.

Question 39

When multiple manufacturing processes generate a single output, it is called a joint manufacturing process.

Question 40

The direct, sequential, and reciprocal services methods of allocating support department costs to production departments using ABC require a three-step process.

Question 41

Goods of low value that are produced from a joint production process are called waste.

Question 42

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

Question 43

The revenues from by-products may be used to offset the costs of the joint production process or they may be reported as other revenue on the income statement (with no related cost of goods sold).

Question 44

Managers at Valvco, Inc., will need to undertake an analysis and interpretation of product costs that include joint costs with great care and understanding.

Question 45

Managers will often find it necessary to use a subjective determination regarding the most appropriate method to use for allocating joint costs.

Question 46

Which of the following terms is commonly used to describe the departments within a company that provide a necessary service to produce a product but are not directly involved in production?

A)investment center departments
B)expense departments
C)costing departments
D)support departments

Question 47

Which of the following statement is false?

A)All direct costs of the support department are accumulated in the department cost center.
B)Support departments may incur both variable and fixed costs, such as salaries and wages.
C)Support departments incur only variable factory overhead costs.
D)General factory overhead, such as depreciation, may be assigned to a support department.

Question 48

While none of the four common methods for allocating joint costs will consistently allocate joint costs more accurately than another, one method may be more appropriate than another depending on the production process.

Question 49

Support departments are sometimes called

A)indirect departments
B)cost departments
C)service departments
D)activity-based departments

Question 50

The market value at split-off method of allocating joint costs is easy to apply because estimating market value at the split-off point is always possible and is very accurate.

Question 51

None of the four common methods for allocating joint costs will consistently allocate joint costs more accurately than another.

Question 52

Which of the following is not the type of work done in a support department?

A)production work on an assembly line that makes a product
B)janitorial services provided for the production facility
C)maintenance work done to keep production machines running smoothly
D)safety and security services provided to keep the production facility safe

Question 53

The outputs generated from a joint manufacturing process are called joint costs.

Question 54

After the split-off point, new costs incurred are not traced to the individual joint products because the costs are needed for both products.

Question 55

Before the split-off point, costs are not traced to the individual joint products because the costs are needed for both products.

Question 56

The outputs generated from the joint manufacturing process are called joint products.

Question 57

Falco Industries may want to use the net realizable value method of allocating joint costs because it manufactures many products that are processed further after the split-off point and will be sold for a much higher price after the additional processing.

Question 58

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

Question 59

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

Question 60

Which of the following describes how support department costs are related to production?

A)They are a part of direct labor cost.
B)They are a part of direct materials cost.
C)They are a part of the both direct labor and direct materials costs.
D)They are indirectly related to production.

Question 61

Airco Company is tempted to consider support department costs to be facility-level costs that do not need to be applied to products. Which of the following explains what is misguided about this approach?

A)Product costs may be inaccurate because direct labor and direct materials are not correctly accounted for in the product costing system.
B)Product costs may be inaccurate because incorrect cost drivers are used.
C)Product costs may be inaccurate because support department services may be used more heavily by some products than others.
D)Product costs may be inaccurate because straight-line depreciation on factory equipment is treated as a general and administrative expense on the income statement.

Question 62

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

A)direct method
B)sequential method
C)reciprocal services method
D)activity-based management method

Question 63

Support department costs are applied to products as a part of

A)fixed manufacturing costs
B)variable cost of goods sold
C)fixed selling and administrative expenses
D)overhead

Question 64

A single plantwide overhead application rate

A)focuses on identifying multiple drivers to apply to every single production department
B)is likely to result in the most accurate product costs
C)is likely to result in inaccurate product costs
D)requires a multiple-step application process from support departments to production departments

Question 65

Which of the following is a drawback in using a single plantwide rate to apply overhead to product costs?

A)Support department costs are not combined with all other overhead costs.
B)A single driver is used for all overhead costs and it is unlikely that the driver selected is appropriate for every type of overhead.
C)Some overhead costs are missing from the application process.
D)Too much emphasis is placed on the fact that manufacturing processes differ from one product to another.

Question 66

Which of the following statements is true?

A)Support department cost allocations should be incorporated into a product costing system.
B)Support department cost allocations should be incorporated into the general accounting system but do not need to be incorporated into a product costing system.
C)Support department cost allocations can be ignored for more accurate product costing.
D)Support department cost allocations should be rolled into the general and administrative costs associated with the corporate office expenses.

Question 67

A key aspect to the multiple production department rate method for overhead application is

A)choosing an appropriate cost driver for each product manufactured
B)choosing an appropriate cost driver for each production department
C)choosing an appropriate number of support departments to include in overhead
D)determining the amount of support activity used by the entire production facility

Question 68

Carolina, the accountant for Duke Manufacturing, tells her friend, Jacob, who works in customer service for Duke, that she is writing journal entries to transfer costs to products. Carolina is referring to the

A)cost application process
B)cost assignment process
C)cost distribution process
D)cost allocation process

Question 69

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

A)direct method
B)sequential method
C)reciprocal services method
D)activity-based management method

Question 70

When multiple production department rates are used to apply overhead to products,

A)all manufacturing costs are first directly traced to support and production departments and then support department costs are allocated to production departments
B)only fixed overhead costs are first directly traced to support and production departments and then support department costs are allocated to production departments
C)all overhead costs are first directly traced to support and production departments and then support department costs are allocated to production departments
D)support department costs are allocated to production departments and then all overhead costs are directly traced to support and production departments

Question 71

Which of the following is not one of the methods used for applying overhead?

A)single plantwide application rate
B)single investment application rate
C)multiple production department rates
D)activity-based costing application method

Question 72

Which of the following is not one of the commonly used methods for allocating support department costs to production departments?

A)direct method
B)sequential method
C)reciprocal services method
D)activity-based management method

Question 73

Juana, a managerial accountant, notes to her colleague that she is reviewing spreadsheets to determine overhead costs that need to be transferred to support and production departments. Juana is working on the process to

A)apply overhead costs
B)assign overhead costs
C)distribute overhead costs
D)allocate overhead costs

Question 74

Which of the following is the correct order for allocating overhead costs using activity-based costing?

A)allocate support activity costs to production activities; determine overhead costs; directly trace and distribute overhead costs to support and production activities; apply production activity costs to products
B)determine overhead costs; directly trace and distribute overhead costs to support and production activities; apply production activity costs to products; allocate support activity costs to production activities
C)directly trace and distribute overhead costs to support and production activities; determine overhead costs; allocate support activity costs to production activities; apply production activity costs to products
D)determine overhead costs; directly trace and distribute overhead costs to support and production activities; allocate support activity costs to production activities; apply production activity costs to products

Question 75

Which of the following is the main feature of support department costs?

A)They are associated with sales commissions.
B)They are office supply costs.
C)They are direct costs.
D)They are indirect costs.

Question 76

Which of the following explains why it is difficult to apply support department costs, such as janitorial services, to products?

A)It is difficult to measure the costs.
B)The costs cannot be quantified in the general ledger.
C)Appropriate cost drivers are difficult, if not impossible, to determine.
D)Support department activities are hard to define.

Question 77

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?

A)Cost application refers to determining the number of cost drivers needed.
B)Cost assignment refers to transferring overhead costs to support and production departments.
C)Cost distribution refers to transferring overhead costs to support and production departments.
D)Allocating costs refers to determining which general ledger accounts to use in the journal entry process.

Question 78

When activity-based costing is used to apply overhead to products, support department costs are referred to as

A)support activity costs
B)department activity costs
C)multiple activity costs
D)activity-based department costs

Question 79

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

A)used by the department
B)budgeted by the department
C)used by the department in the prior month
D)used by the entire production facility

Question 80

A key difference between using multiple production department rates and activity-based costing is

A)the multiple production department rate method is used to distribute overhead costs to production activities and activity-based costing is used to distribute overhead costs to production departments
B)the multiple production department rate method is used to distribute overhead costs to production departments and activity-based costing is used to distribute overhead costs to production activities
C)the multiple production department rate method is used to distribute general and administrative costs to production departments and activity-based costing is used to distribute overhead costs to production activities
D)the multiple production department rate method is used to distribute general and administrative costs to production departments and activity-based costing is used to distribute general and administrative costs to production activities