46. Cope, Inc. has the following costs and usage data for its support departments: Direct Departments Operating Departments Services Provided By: $50,000 10% 60,000 20% 40% 30% 20% 8 20% 20% 40% 30,000 10% 10% - 50% 30% If the step-down method is used, and the order of allocation is department B first, then A, and finally Cthe amount of support department A costs allocated to operating department 2 will be: a) $15,000 b) $23,250 c) $24,000 d) $18,600 Answer: b Difficulty: Easy Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. CPA: Management Accounting 47. Cope, Inc. has the following costs and usage data for its support departments: Direct Departments Operating Departments Services Provided By: $50,000 10% 60,000 20% 40% 30% 20% - 20% 20% 40% 30,000 10% 10% - 50% 30% If the step-down method is used and the order of allocation is based on the quantity of service each support department 47. Cope, Inc. has the following costs and usage data for its support departments: Departments Oping Departments 2 Services Provided By: $50,000 ,60,00040% 10% 206 % 10% 40% 30% 20% - 20% 20% , 40% 30,000 10% 10% - 50% 30% If the step-down method is used and the order of allocation is based on the quantity of service each support department provides to other support departments, the total cost of support department C will be: a) $30,000 b) $37,750 c) $42,000 d) $49,750 Answer: d Difficulty: Easy Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. 48. Bronson, Inc. has two support departments, Personnel and Maintenance, whose costs are to be allocated to the operating department's overhead for budgeting and inventory costing purposes. Projected amounts for the next year follow Direct costs Services provided to: $46,750 $22,500 10% Cutting Assembly If the reciprocal method is used, the cost function representing the total cost of personnel will be: a) $46,750(0.2 x maintenance cost) b) $46,750 (0.4 x maintenance cost) c) $46.750(0.1 x maintenance cost 48. Bronson, Inc. has two support departments, Personnel and Maintenance, whose costs are to be allocated to the operating department's overhead for budgeting and inventory costing purposes. Projected amounts for the next year follow $46,750 $22,500 Direct costs Services provided to: 10% Cutting Assembly 60% If the reciprocal method is used, the cost function representing the total cost of personnel will be: a) $46,750 (0.2 x maintenance cost) b) $46,750 (0.4 x maintenance cost) c) $46,750(0.1 x maintenance cost) d) $46,750(0.1 x maintenance cost)(0.2 x personnel cost) Answer: c Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. 49. Bronson, Inc. has two support departments, Personnel and Maintenance, whose costs are to be allocated to the operating department's overhead for budgeting and inventory costing purposes. Projected amounts for the next year follow: Direct costs Services provided to: $46,750 $22,500 10% Maintenance Cutting Assembly 40% 60% If the reciprocal method is used, the total cost of maintenance will be: a) $32,500 b) $22,500 c) $27,175 d) $31,850 Answer: a