15) The cost-allocation method that allocates each support-department's costs to operating departments only is the direct method. 16) Under the incremental method, the first incremental user receives the largest allocation of the common costs. 15) 16) 17) When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions. 17) 18) Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services. 18) 19) The FASB (Financial Accounting Standards Board) provides cost accounting guidance (standards) for U.S. government contractors who do business with the federal government. 19) 20) Because the variable costs are directly and causally linked to usage, charging them as a function of the actual usage is appropriate. 20) TRUE/FALSE. Write T if the statement is true and 'F' if the statement is false. 1) Revenue allocation is required to determine the profitability of individual items within a bundled product. 1) 2) If the incremental users are newly formed companies or subunits, the incremental method may decrease their chances for short-run survival by assigning them a high allocation of the common costs. 2) 3) 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. 3) 4) The single-rate method transforms the direct costs per hour into indirect costs to users of that facility. 4) 5) Allocating common costs can best be achieved by using the stand-alone cost-allocation method. 6) An alternative way to implement the reciprocal method is to formula and use linear equations. 7) The Shapley value method of allocating common costs only considers each party as a primary party and ignores incremental parties. 5) 6) 7) 8) An advantage of the single-rate method is that it is the most accurate method of cost-allocation. 8) 9) If the government wants to contract a very large scale project with significant uncertainty about what the final cost will be: often a cost-plus contract is awarded to attract qualified contractors who may otherwise not be willing to accept the risks inherent in a guaranteed bid price. 9) 10) When allocating the revenues between a bundled product offering, management judgement can be used in issuing revenue-allocation weights. 10) 11) The selling prices method under stand-alone revenue-allocation method is best because the weights explicitly consider the prices customers are willing to pay for the individual products. 11) 12) The direct method is conceptually the most precise method because it considers the mutual services provided among all support departments. 12) 13) All contracts with U.S. government agencies must comply with the cost accounting standards issued by the SEC. 13) 14) One version of the reciprocal method of cost allocation uses a sequence that begins with allocating the costs of the support department that renders the lowest amount of services to support departments and ends with the allocation of costs of the department that renders the highest dollar amount of services to other support departments. 14)