53. Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units Operating Maintenance Personne Tables Chairs Direct costs 1,000 Square metres 20,000 60,000 Number of employees $27,000 $24,000 $44,000 $2 6,000 10,000 20 40 80 Units produced 4,000 2,000 Assume the direct method is used. The cost per unit in the Chair department would be: a) $27.025 per chair b) $23.509 per chair c) $25.147 per chair d) $25.900 per chair Answer: a Difficulty: Medium Learning Objective: Explain how the direct method is used to allocate support costs to operating departments. 54. Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units Operating Maintenance Personne Tables Chairs Direct costs 1,000 $27,000 $24,000 $44,000 $2 54. Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units Maintenance Personne Tables Chairs Direct $27,000 $24.000 $44,000 $2 1,000 Square metres 20,000 60,000 Number of employees 6,000 10,000 Units produced 4,000 2,000 Assume the step-down method is used. The amount of cost allocated from Personnel to the Table department is: a) $11,200 b) $12,503 c) $8,938 d) $12,600 Answer: d Difficulty: Medium Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. 55. Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units Operating Maintenance Personnel Tables Chairs Direct $27,000 $24,000 $44,000 $2 1,000 55. Quinlan, Inc. has two support departments (Maintenance and Personnel) and two operating departments (Tables and Chairs). The Maintenance department provides more services to the Personnel department than the Personnel department provides to Maintenance. Once the support department costs have been allocated to the operating departments, each operating department allocates its total costs to units Operating Maintenance Personne Tables Direct $27,000 $24,000 $44,000 $2 1,000 Square metres 20,000 60,000 Number of employees 6,000 10,000 20 40 70 Units produced 4,000 80 2,000 Assume the step-down method is used. The amount of cost allocated from Personnel to Maintenance is: a) $1,500 b) $1,687.50 c) $9,000 d) $O Answer: d Difficulty: Medium Learning Objective: Explain how the step-down method is used to allocate support costs to operating departments. CPA: Management Accounting 56. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services: Maint Admin- enance istration Op1 Op2 Op3 Services Supplied By: Maintenance 25% 50% 12.5% 12.5%
