Use the following information for the next 5 questions:

The managers at Ithaca Manufacturing are discussing ways to allocate the cost of support departments such as

Quality Control and Maintenance to the operating departments.

To aid them in this discussion, the controller

has provided the following information:

Support

Operating

Quality

Maint-

Control

enance

Machining

Assembly

Total

Budgeted overhead costs

before allocation

$350,000

$200,000

$400,000

$300,000

$1,250,000

Budgeted machine hours

50,000

50,000

Budgeted direct labour hours

25,000

25,000

Budgeted hours of service:

Quality control

7,000

21,000

7,000

35,000

Maintenance

10,000

18,000

12,000

40,000

w

92.

(CMA) If Ithaca Manufacturing uses the direct method of allocating support department costs, the

total support costs allocated to the Assembly department would be:

a.

$80,000

b.

$87,500

c.

$120,000

d.

$167,500

hzzled

8-18

Cost Management

w

93.

(CMA) Using the direct method, the total amount of overhead (production and support) allocated to

the Machining department for each machine hour at Ithaca Manufacturing would be:

a.

$2.40

b.

$5.25

c.

$8.00

d.

$15.65

w

94.

(CMA) If Ithaca Manufacturing uses the step-down method of allocating support costs beginning with

quality control, the maintenance costs allocated to the Assembly Department would be:

a.

$70,000

b.

$108,000

c.

$162,000

d.

$200,000

w

95.

(CMA) If Ithaca Manufacturing uses the reciprocal method of allocating support costs, the total

amount of quality control costs (rounded to the nearest dollar) to be allocated to the other departments

would be:

a.

$284,211

b.

$336,842

c.

$350,000

d.

$421,053

w

96.

(CMA) If Ithaca Manufacturing decides not to allocate support costs to the operating departments, the

overhead allocated to each direct labour hour in the Assembly Department would be:

a.

$3.20

b.

$3.50

c.

$12.00

d.

$16.00