1. Beta Company is preparing its annual profit plan. As part of its analysis of
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Question
1. Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $40,600 for sales support should be assigned to the individual customers from the information given as follows:
Customer A
Customer B
Units Purchased
70,000
180,000
Purchase order (annual)
14
29
What is the amount of the sales support costs that should be allocated to Customer A assuming Beta uses units purchased to compute activity-based costs?
$11,368.
$37,700.
$2,900.
$29,232.
2. Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $30,000 for sales support should be assigned to the individual customers from the information given as follows:
Customer A
Customer B
Units Purchased
30,000
170,000
Purchase order (annual)
15
10
What is the amount of the sales support costs that should be allocated to Customer A, assuming Beta uses purchases orders to compute activity-based costs?
$25,500.
$18,000.
$12,000.
$4,500.
3. Yellow Industries decides to price delivery service according to the results of a recent activity-based costing (ABC) study. The study indicates Yellow should charge $15 per order, 8% of the order's value for general delivery costs, $7.00 per item, and $37 for delivery.
A year later, Yellow collected the following information for two of its best customers:
What are the total delivery costs charged to Customer D during the year?
$32,354.
$42,754.
$42,125.
$42,529.
4. Gundy Press reports the following information about resources. At the beginning of the year, Gundy estimated it would spend $44,000 for setups and $23,000 for clerical.
Compute unused resource capacity for setups for Gundy Press.
$5,232.
$7,962.
$3,000.
$13,194.
5. BC Enterprises' quality control report for August contains the following items.
$31,000.
$27,000.
$37,000.
$19,000.
6. BC Enterprises' quality control report for August contains the following items.
What would be the total of the internal failure costs on the August quality control report for BC Enterprises?
$10,000.
$19,000.
$9,000.
$17,000.
7. BC Enterprises' quality control report for August contains the following items.
What would be the total of the conformance costs on the August quality control report for BC Enterprises?
$60,000.
$19,000.
$50,000.
$41,000.
8. QC Enterprises quality control report for August contains the following items.
What would be the total of the prevention costs on the August quality control report for QC Enterprises?
$112,000.
$129,000.
$76,000.
$69,000.
9. QC Enterprises quality control report for August contains the following items.
What would be the total of the internal failure costs on the August quality control report for QC Enterprises?
$126,000.
$66,000.
$108,000.
$94,000.
10. Castle Company has two service departments and two producing departments. The number of employees in each department is:
The department costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $51,000 during a given period, the amount of cost allocated to Department B under the direct method would be:
$0.
$25,947.37.
$22,139.53.
$25,052.63.
11. Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred:
The following information is available concerning various activity measures and service usages by each of the divisions:
Using the most appropriate allocation basis, what is the personnel cost allocated to Division A?
$59,919.
$76,465.
$78,368.
$113,000.
12. Castle Company has two service departments and two user departments. The number of employees in each department is:
The fixed costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $39,625 during a given period, the amount of cost allocated to the Cafeteria under the step method would be:
$0.
$1,997.90.
$1,972.50.
$2,103.98.
13. The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $320,000 are allocated on the basis of machine hours. The Accounting Department's costs of $140,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $320,000 and $520,000, respectively.
What is the Accounting Department's cost allocated to Department B using the direct method?
$64,615.
$75,385.
$59,231.
$2,692.
14. The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $320,000 are allocated on the basis of machine hours. The Accounting Department's costs of $140,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $320,000 and $520,000, respectively.
What is the cost of the Accounting Department's cost allocated to Department A using the step method and assuming the Maintenance Department's costs are allocated first?
$77,013.
$77,579.
$76,060.
$64,311.
15. Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Expected costs in the service departments for June are as follows:
Under the direct method of allocation, what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)
$6,951.
$8,432.
$9,547.
$10,054.
16. The following information relates to Ray Corporation for the past accounting period.
Using the simultaneous solution method, Department B's cost allocated to Department C is
$46,195
$31,941
$32,895
$15,971
17. Lite Co. manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as follows:
Joint costs were allocated using the net realizable value method at the split-off point. The joint costs allocated to product X were
$81,000.
$106,800.
$162,000.
$177,722.
18. Boxes-2-Go has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,290,000. You have been provided with the following information for the upcoming year:
What is the allocation rate for the upcoming year, assuming Boxes-2-Go uses the single-rate method and allocates common costs based on the number of calls?
$14.30.
$11.44.
$26.00.
$19.28
19. Boxes-2-Go has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $1,725,000. You have been provided with the following information for the upcoming year:
The cost accountant determined $1,035,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to the Large Box Division, assuming the company uses dual-rates to allocate common costs?
$1,035,000.
$990,000.
$735,000.
$562,500.
20. The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department. The following budget has been prepared for the year.
If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost will be allocated to the Marketing Department?
$189,000.
$378,000.
$525,000.
$210,000.
21. The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department. The following budget has been prepared for the year.
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated to the Economics Department, assuming the Economics Department actually made 8,400,000 copies during the year?
$216,000.
$211,200.
$306,000.
$402,000.
22. The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department. The following budget has been prepared for the year.
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated to the Economics Department, assuming the Economics Department actually made 5,000,000 copies during the year?
$205,000.
$335,000.
$255,000.
$176,000.
23. Fenway Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $3,456,000. You have been provided with the following information for the upcoming year:
What is the allocation rate for the upcoming year, assuming Fenway Telcom uses the single-rate method and allocates common costs based on the number of connections?
$72.00.
$27.00.
$90.00.
$18.00.
24. Fenway Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $4,080,000. You have been provided with the following information for the upcoming year:
What is the allocation rate for the upcoming year, assuming Fenway Telcom uses the single-rate method and allocates common costs based on the time on the network?
$10.00.
$100.00.
$20.00.
$80.00.
25. Fenway Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $4,080,000. You have been provided with the following information for the upcoming year:
The cost accountant determined $2,937,600 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is the total server network costs allocated to the Commercial Division, assuming the company uses dual-rates to allocate common costs?
$1,264,800.
$962,880.
$734,400.
$204,000.
1. Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $40,600 for sales support should be assigned to the individual customers from the information given as follows:
Explanation / Answer
1) Activity rate
= $40600 / (70000 + 180000) units
= $40600 / 250000 units
= $0.1624 per unit
Support cost to be allocated to customer A
= Number of units produced x per unit cost of activity
= 70000 x $0.1624
= $11368
2) Activity rate
= $30000 / (15+10) purchase orders
= $30000 / 25 purchase orders
= $1200 per order
Support cost to be allocated to customer A
= Number of purchase orders required x cost of activity per order
= 15 x $1200
= $18000
3)
Total delivery costs charged to customer D
= 15 x $15 + 17 x $37 + 4500 x $7 + 8% x $130000 = $42754
4)
Value of resources used
Set up = $262 x 149 = $39038
Clerical = $32 x 524 = $16768
Unused resource capacity for set up = $47000 - $39038 = $7962
5)
Gathering, analysis and reporting quality data = $7000
Maintaining equipment to gather quality data = $13000
Visiting customer sites to test products = $11000
Total = $31000
6)
Cost of material wasted during production = $10000
7)
Gathering, analysis and reporting quality data = $10000
Maintaining equipment to gather quality data = $8000
Visiting customer sites to test products = $6000
Inspecting raw materials received from vendors = $12000
Testing and inspecting finished products = $13000
Designing products to reduce problems = $11000
Total = $60000
8)
Liability costs associated with defective products = $13000
Quality training provided to workers = $43000
Raw materials used to correct defects = $73000
Total $129000
10)
The amount of cost allocated to Department B = [$51000/ (290+280)] * 280 = $25052.63
11)
Personal cost allocated to department A
= [$113000 / ($383000+$183000)] * $383000
= $76465
12)
Cost allocated under step method
= [$39625 / (30+290+275)]*30 = $1997.90
13)
The accounting department’s cost allocated to department B
= =(140000/ (28+24)) * 24= $64615
14) Cost of maintenance department allocated to accounting department
= [320000 / (40+2700+400)]*40 = $4076
Revised Cost of accounting department = 140000+4076 = $144076
The accounting department’s cost allocated to department A:
=((144076/ (28+24)) * 28 = $77579
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