38. The accountant for Milton, Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected: Operating Maintenance Cafeteria Cutting Packaging Direct costs 300,000 Number of employees Square $50,000 $45,000 $275,000 S 15 10 150 250 1,500 2,000 3,500 4,000 If the reciprocal method is used, the total amount that will be allocated for maintenance is: a) $52,022 b) $55,952 c) $50,211 d) $57,034 Answer:a Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. CPA: Management Accounting 39. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Assembly Finishing Direct costs $25,000 $15,000 $200,000 350,000 Number of employees 15 450 Engineering supervisor's time 15% 30% 35% 20% 40. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Assembly nishing Direct costs $25,000 $15,000 $200,000 $350,000 15 Number of employees 10 Engineering supervisor's time 15% 30% 35% 20% If the step-down method is used and engineering costs are allocated first, the fraction of engineering costs allocated to the assembly department will be: a) 35/55 b) 35/100 c) 35/70 d) 35/85 Answer:c Difficulty: Medium Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. CPA: Management Accounting Bloomcode: Application 41. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Operating Departments Engineering Administration Assembly hing Direct costs $25,000 $15,000 15 30% $200,000 350,000 Number of employees 10 Engineering supervisor's time 15% 300 35% 20% 38. The accountant for Milton, Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected: Operating Maintenance Cafeteria Cutting Packaging Direct costs 300,000 Number of employees Square $50,000 $45,000 $275,000 S 15 10 150 250 1,500 2,000 3,500 4,000 If the reciprocal method is used, the total amount that will be allocated for maintenance is: a) $52,022 b) $55,952 c) $50,211 d) $57,034 Answer:a Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. CPA: Management Accounting 39. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Assembly Finishing Direct costs $25,000 $15,000 $200,000 350,000 Number of employees 15 450 Engineering supervisor's time 15% 30% 35% 20% 40. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Assembly nishing Direct costs $25,000 $15,000 $200,000 $350,000 15 Number of employees 10 Engineering supervisor's time 15% 30% 35% 20% If the step-down method is used and engineering costs are allocated first, the fraction of engineering costs allocated to the assembly department will be: a) 35/55 b) 35/100 c) 35/70 d) 35/85 Answer:c Difficulty: Medium Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. CPA: Management Accounting Bloomcode: Application 41. Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Operating Departments Engineering Administration Assembly hing Direct costs $25,000 $15,000 15 30% $200,000 350,000 Number of employees 10 Engineering supervisor's time 15% 300 35% 20%
