Question 1

A method for allocating service department costs that ignores other service departments when any given service department's costs are allocated to the revenue-producing departments is called the

Accepted Answer

The direct method only allocates the costs of a single service department directly to the revenue-producing department without considering the costs of other service departments. This method is simple but may not accurately reflect the true cost of the service provided by the service department. The indirect method and step-down method both consider the costs of multiple service departments, while the step-up method is not a commonly used allocation method.

Question 2

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the direct method is used to allocate costs, the total cost of the Mixing Department after allocation would be

Accepted Answer

The direct method allocates service department costs directly to production departments. The total cost of the Mixing Department after allocation is $121,714.

Question 3

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the direct method is used to allocate costs, the total cost of the Finishing Department after allocation would be

Accepted Answer

The direct method allocates service department costs directly to production departments without considering any service department interactions. The total cost of the Finishing Department after allocation would be the sum of its initial costs and the allocated costs from service departments, which is $39,571.

Question 4

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method of allocating costs is used, and the Personnel Department renders the greatest service, then the total amount of overhead that would be allocated from Maintenance to Mixing is

Accepted Answer

The answer of City Company has two service departments, Maintenance...

Question 5

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total cost of the Mixing Department after allocation would be

Accepted Answer

The Maintenance Department renders the greatest service, so it will receive the largest allocation of costs. The total cost of the Mixing Department after allocation would be $120,429.

Question 6

In the step-down method, the last service department in the sequence is the one that renders the

Accepted Answer

The answer of In the step-down method, the last service...

Question 7

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total cost of the Mixing Department after allocation would be

Accepted Answer

The step-down method allocates costs to departments based on the amount of service they provide to other departments. In this case, the Maintenance Department renders the greatest service, so it will receive the largest allocation of costs. The total cost of the Mixing Department after allocation would be $30,107.

Question 8

Which of the following is the least likely alternative to be used to allocate costs?

Accepted Answer

Allocating all costs evenly to all other departments is not a rational approach as it does not reflect the actual usage of resources by each department, and it does not promote cost efficiency. Therefore, it is the least likely alternative to be used to allocate costs. Options A, C, and D are all valid alternatives to allocate costs depending on the circumstances.

Question 9

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the direct method is used to allocate costs, the total cost of the Mixing Department after allocation would be

Accepted Answer

The direct method allocates service department costs directly to production departments. The total cost of the Mixing Department after allocation is $30,429.

Question 10

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Personnel Department renders the greatest service, then the total cost of the Finishing Department after allocation would be

Accepted Answer

The answer of County Company has two service departments, Maintenance...

Question 11

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method of allocating costs is used, and the Personnel Department renders the greatest service, then the total amount of overhead that would be allocated from Maintenance to Mixing is

Accepted Answer

The answer of County Company has two service departments, Maintenance...

Question 12

The greatest virtue of the direct method is

Accepted Answer

The direct method's greatest virtue is its simplicity, as it straightforwardly allocates costs without considering reciprocal relationships between service departments.

Question 13

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method of allocating costs is used, and the Personnel Department renders the greatest service, then the total amount of overhead that would be allocated from Maintenance to Finishing is

Accepted Answer

To allocate overhead costs using the step-down method, we need to first allocate the costs of the service departments to each other based on the order of their significance. Since the Personnel department renders the greatest service, we allocate its costs first.

- Personnel costs are allocated first: 
 - $48,000 to Mixing ((2/3) * $48,000)
 - $24,000 to Finishing ((1/3) * $48,000)
- Maintenance costs are then allocated: 
 - $16,000 to Mixing ((4,000 sq. ft. /12,000 sq. ft.) * $48,000)
 - $8,000 to Finishing ((2,000 sq. ft. /12,000 sq. ft.) * $48,000)

Therefore, the total overhead allocated from Maintenance to Finishing is $8,000 + $24,000 = $33,429. The answer is B.

Question 14

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the direct method is used to allocate costs, the total cost of the Finishing Department after allocation would be

Accepted Answer

The direct method allocates service department costs directly to production departments without recognizing any service provided between service departments. The total cost of the Finishing Department after allocation would be the sum of its direct costs and the allocated costs from service departments, which is $158,286.

Question 15

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, the total amount of overhead that would be allocated from Personnel to Mixing is

Accepted Answer

In the step-down method, the department that provides the most service is allocated first. Since Maintenance renders the greatest service, its costs are allocated first, followed by Personnel. The amount allocated from Personnel to Mixing is calculated based on the remaining costs after Maintenance's allocation.

Question 16

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, the total amount of overhead that would be allocated from Personnel to Mixing is

Accepted Answer

The answer of County Company has two service departments, Maintenance...

Question 17

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total amount of overhead that would be allocated from Personnel to Finishing is

Accepted Answer

The answer of City Company has two service departments, Maintenance...

Question 18

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method of allocating costs is used, and the Personnel Department renders the greatest service, then the total amount of overhead that would be allocated from Maintenance to Finishing is

Accepted Answer

The answer of City Company has two service departments, Maintenance...

Question 19

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Personnel Department renders the greatest service, then the total cost of the Finishing Department after allocation would be

Accepted Answer

The answer of City Company has two service departments, Maintenance...

Question 20

County Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage, while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total amount of overhead that would be allocated from Personnel to Finishing is

Accepted Answer

To allocate costs using the step-down method, first, we need to allocate the costs from the Maintenance department to the other departments:

- Mixing department: 40% of $24,000 = $9,600
- Finishing department: 60% of $24,000 = $14,400

Next, we need to allocate the costs from the Personnel department to the other departments, but we have to take into account the costs already allocated from the Maintenance department:

- Mixing department: ($10,000 + $9,600) / 4 = $4,650
- Finishing department: ($14,000 + $14,400) / 6 = $4,900

Therefore, the total amount of overhead that would be allocated from Personnel to Finishing is:

$9,800 + $4,900 = $14,700

Hence, the correct answer is C) $32,571.

Quiz 5: Cost Allocation and Activity-Based Costing Systems

A method for allocating service department costs that ignores other service departments when any given service department's costs are allocated to the revenue-producing departments is called the

In the step-down method, the last service department in the sequence is the one that renders the

Which of the following is the least likely alternative to be used to allocate costs?

The greatest virtue of the direct method is