ACCT3110 Homework Assignment 8 Part I. Allocation of Support or Service Department Costs (Chapter 15) Part I. Multiple Choice select the best answer for each question 1) There are two methods for allocation of service department cost to cost objects - single-rate cost method and dual-rate cost-allocation method. Which of the following is an advantage of the single-rate method? A) It is less costly to implement. B) It classifies costs as fixed and variable costs. C) It gives signals regarding how variable and fixed costs behave differently. D) It helps the managers on short-run and long-run planning due to fixed cost allocation as per budgeted usage. 2) The dual-rate cost-allocation method classifies costs in each cost pool into a ________. A) budgeted-cost pool and an actual-cost pool B) variable-cost pool and a fixed-cost pool C) direct-cost pool and an indirect-cost pool D) direct-cost pool and a reciprocal-cost pool 3) When using the dual-rate method, the fixed cost allocation is based on ________. A) indirect usage B) budgeted usage C) incremental cost allocation D) prime cost allocation 4) The biggest advantage of using budgeted capacity to allocate costs is that it ________. A) focuses the user's division with the costs of overused capacity B) never causes over or under-allocated overhead C) burdens the user divisions with the costs of unused capacity D) focuses management's attention on unused capacity 5) Special cost-allocation problems arise when ________. A) support department costs exceed budgetary estimates B) Get this assignment done with us. Quality work and good grades assured. all work will be done in excel with calculations. We can handle all ur weekly assignments for you. visit www.ehomeworksolution.com practical capacity is used as the allocation base C) support departments provide reciprocal services to each other and operating departments D) the same cost-allocation base is used among various support departments 6) The direct allocation method ________. A) allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments B) allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments C) allocates each support-department's costs to operating departments only D) requires managers to rank the support departments in the order that the step-down allocation is to proceed 7) The method that allocates costs by explicitly including all the services rendered among all support departments is the A) direct method B) step-down method C) reciprocal method D) sequential method 8) The step-down method ________. A) partially recognizes the services provided among support departments B) does not recognize the total services that support departments provide to each other C) is conceptually the most precise method D) results in allocating only the support costs used by operating departments 9) The direct allocation method does not allocate support department costs to other support departments. A) True B) False 10) Under the step-down method, once a support department's costs have been allocated, all subsequent support-department costs are allocated back to it. A) True B) False Part Two: Problems P1. Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $150,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Support Departments Production Departments Warehouse Department Data Center Department Music Books Budgeted costs $350,000 $150,000 $125,000 $150,000 Budgeted warehouse-hours NA 500 1,000 1,500 Number of computer hours 200 NA 800 1,000 a. Allocate service department costs to operating departments using the direct method. b. Allocate service department costs to operating departments using the step-down method (the warehouse department is allocated first). c. Allocate service department costs to operating departments using the reciprocal method. P2. Konosh Medical Clinic has two service departments, Building Services and Energy, and three operating departments, Pediatrics, Geriatrics, and Surgery. Konosh allocates the cost of Building Services on square footage and Energy on patient days. No distinction is made between variable and fixed costs. Budgeted operating data for last year follow: Service Departments Operating Departments Building Services Energy Pediatrics Geriatrics Surgery Budgeted costs before allocation $18,000 $8,000 $80,000 $50,000 $90,000 Square footage 1,000 4,000 6,000 18,000 12,000 Patient days -- -- 5,500 7,700 8,800 a. Allocate service department costs to operating departments using the direct method. b. Allocate service department costs to operating departments using the step-down method (the building service department is allocated first). c. Allocate service department costs to operating departments using the reciprocal method. P3. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departmentsadministrative services