Question $1(2$ pts$)$

How much additional income does selling the by$-$product bags earn Cotopaxi $($per bag$)?$

Group of answer choices

$-$$$40$ per bag $($loss$)$

$$0$ per bag

$$10$ per bag

$$40$ per bag

$$50$ per bag

Question $2(2$ pts$)$

Ignore this question, we have not learned transfer pricing yet. The correct answer is $$50.$

After the first year, Cotopaxi realized that the demand for the by$-$product bags is so great that they cannot supply enough for both the direct market sales and as bundled products. What is the optimal transfer price that the by$-$product bag division should charge given this capacity constraint?

Group of answer choices

$$0$ per bag

$$10$ per bag

$$40$ per bag

$$50$ per bag

Question $3(2$ pts$)$

What is the amount of Joint Cost, under the Net Realizable Value method, that will be allocated to each by$-$product bag?

Group of answer choices

$-$$$40$ of Joint Cost per bag

$$0$ of Joint Cost per bag

$$10$ of Joint Cost per bag

$$40$ of Joint Cost per bag

$$50$ of Joint Cost per bag

Question $4(2$ pts$)$

Given your answers to the two previous questions, and recalling that Cotopaxi uses the net realizable value method to account for the by$-$product bags, how much profit per bag will be recognized by the by$-$product bag division?

Group of answer choices

$-$$$40$ per bag $($loss$)$

$$0$ per bag

$$10$ per bag

$$40$ per bag

$$50$ per bag

Question $5(2$ pts$)$

What happened to the joint cost of fabric allocated to the main product lines when the new by$-$product bags were introduced?

Group of answer choices

Increased the joint costs allocated to the other products

Decreased the joint costs allocated to the other products

No change in joint costs allocated to the other products

Question $6(2$ pts$)$

What did this new line of by$-$product bags do to the recognized profitability of Cotopaxi$$s main backpack products?

Group of answer choices

Increased the profitability of the main products

Decreased the profitability of the main products

No change in the profitability of the main products

Question $7(2$ pts$)$

What did this new line of by$-$product bags do to the total profitability of Cotopaxi$$s as a whole? $($Note: assume the new bags only incurred the variable costs listed above$)$

Group of answer choices

Increased overall profitability

Decreased overall profitability

No change to overall profitability

Question $8(2$ pts$)$

If Cotopaxi had instead allocated the joint$-$cost of fabric using the physical units method, how would this affect their overall profitability for the company as a whole $($compared to allocating by the approximate relative sales value method$)?($Note: assume all produced products were sold$)$

Group of answer choices

Increase profitability

Decrease profitability

No effect on profitability

Question $9(2$ pts$)$

If Cotopaxi had instead accounted for the new bags as a full product instead of a by$-$product, how would this affect their overall profitability for the company as a whole $($compared to considering the new bags a by$-$product$)?($Note: assume all produced products were sold$)$

Group of answer choices

Increase profitability

Decrease profitability

No effect on profitability

Service Costs

Entertainment $720$ is an entertainment conglomerate, consisting of two departments: Sales Department, headed by Jean$-$Ralphio, and Event Planning, headed by Tom. Recently, E$720$ decided to hire an Accountant, Ben. They also have a corporate jet both for Event Planning and Accounting related travel. Jean$-$Ralphio, for reasons that might be obvious, is not allowed to use the corporate Jet.

Ben, having taken a managerial accounting class, decided to investigate the costs and structure associated with the service departments of Entertainment $720,$ which he decided were his Accounting department $($costing $$100,000$ per year$),$ and the Jet $($costing $$1,000,000$ per year$).$ The departments receive the following percentage of service:

The service costs are allocated based on the percentages shown. No other costs should be considered for this problem.

Question $10(3$ pts$)$

Using the Direct Method, what is the amount of service cost allocated to Event Planning?

Group of answer choices

$$550,000$

$$790,000$

$$1,000,000$

$$1,050,000$

Question $11(2$ pts$)$

What would happen to the amount of service cost allocated to Event Planning if the service costs were allocated using the Step Down method to Accounting first, compared to using the Direct Method? $($Hint: Step down to Accounting first means ignore the $20\%$ arrow that goes to Jet$)$

Group of answer choices

Allocated amount would increase $($compared to Direct Method above$)$

Allocated amount would decrease $($compared to Direct Method above$)$

Allocated amount would remain the same $($compared to Direct Method above$)$

Question $12(3$ pts$)$

Using the Direct Method, what is the amount of service cost allocated to the Sales Department?

Group of answer choices

$$0$

$$40,000$

$$50,000$

$$125,000$

$$550,000$

Question $13(1$ pts$)$

What would happen to the amount of service cost alloc