1. Because support department costs are directly related to production, they are easily applied to products. T OR F
2. Support departments incur direct costs such as the cost of wages and salaries for employees who work in a machine maintenance department. T OR F
3. If a company considers support department costs to be facility-level costs, product costs may be inaccurate because certain products use support department services more heavily than others. T OR F
4. It is more accurate to ignore support department costs when determining product costs. T OR F
5. It is sometimes difficult, if not impossible, to find an appropriate cost driver for applying support department costs. T OR F
6. Because support department costs are directly related to production, they are applied to product costs as a part of direct labor. T OR F
7. When using multiple production department rates, all overhead costs are allocated to production departments and none of them are directly traced to support departments. T OR F
8. When using multiple production department rates, there is a maximum of one support department per production process. T OR F
9. The outputs generated from a joint manufacturing process are called joint costs. T OR F

10. When activity-based costing is used to apply overhead to products, support department costs are referred to as

a. multiple activity costs

b. department activity costs

c. support activity costs

d. activity-based department costs

11. Miller Safety Equipment uses multiple production department rates to apply overhead to products. The company will allocate support department costs to production departments based on the amount of support activity

a. budgeted by the department

b. used by the department in the prior month

c. used by the department

d. used by the entire production facility

12. When multiple production department rates are used to apply overhead to products,

a. support department costs are allocated to production departments and then all overhead costs are directly traced to support and production departments

b. only fixed overhead costs are first directly traced to support and production departments and then support department costs are allocated to production departments

c. all manufacturing costs are first directly traced to support and production departments and then support department costs are allocated to production departments

d. all overhead costs are first directly traced to support and production departments and then support department costs are allocated to production departments

13. A single plantwide overhead application rate

a. is likely to result in inaccurate product costs

b. requires a multiple-step application process from support departments to production departments

c. focuses on identifying multiple drivers to apply to every single production department

d. is likely to result in the most accurate product costs

14. Which of the following is a drawback in using a single plantwide rate to apply overhead to product costs?

a. Too much emphasis is placed on the fact that manufacturing processes differ from one product to another.

b. A single driver is used for all overhead costs and it is unlikely that the driver selected is appropriate for every type of overhead.

c. Support department costs are not combined with all other overhead costs.

d. Some overhead costs are missing from the application process.

15. Which of the following is the most difficult but most accurate of the commonly used methods for allocating support department costs to production departments?

a. nonreciprocal services method

b. reciprocal services method

c. direct method

d. sequential method

16. The following list includes descriptions of the steps in the five-step process to allocate support department costs to production departments. Which of the following descriptions is incorrectly paired to the step number?

a. Step 4: Determine the percentage usage of support department cost drivers by each department.

b. Step 1: Apply production department costs to products.

c. Step 3: Determine the usage of the support department cost driver by each department.

d. Step 2: Select a cost driver for each department.

17. Which of the following statements is true about the direct method of allocating support department costs to production departments?

a. The direct method is more difficult to use than the sequential method.

b. The direct method requires that the same cost driver be used for each support department.

c. The direct method allocates all support department costs directly to production departments thus ignoring the possibility that some support departments may also serve other support departments.

d. The direct method allocates only some of the support department costs directly to production departments and is more accurate than the reciprocal services method.

18. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has the following information about its two service departments and two production departments, Cutting and Assembly:

	Square Feet	Number of Employees
Janitorial Department	100	20
Cafeteria Department	10,000	10
Cutting Department	2,000	60
Assembly Department	8,000	20

The percentage (proportional) usage of the Janitorial Department by the Cutting Department is

a. 20%

b. 80%

c. 10%

d. 9%

19. Using the direct method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has the following information about its two service departments and two production departments, Cutting and Assembly:

	Square Feet	Number of Employees
Janitorial Department	100	20
Cafeteria Department	10,000	10
Cutting Department	2,000	60
Assembly Department	8,000	20

The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is

a. 22%

b. 25%

c. 75%

d. 18%

20. Which of the following statements is true about the sequential method of allocating support department costs to production departments?

a. The sequential method captures some but not all the inter-support-department services by allocating support departments to other support departments and production departments in a series of steps.

b. The sequential method is less accurate than the direct method.

c. The sequential method requires that the same cost driver be used for each support department.

d. The sequential method is also known as the step-up method.