ALLOCATION OF SUPPORT DEPARTMENT COSTS.docx
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ALLOCATION OF SUPPORT DEPARTMENT COSTS.docx
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ALLOCATIONOFSUPPORTDEPARTMENTCOSTS
ALLOCATIONOFSUPPORTDEPARTMENTCOSTS,
COMMONCOSTS,ANDREVENUES
TRUE/FALSE
1.Thedualcost-allocationmethodclassifiescostsintotwopools,abudgetedcostpoolandanactualcostpool.
Answer:
FalseDifficulty:
1Objective:
1
TermstoLearn:
dual-ratecost-allocationmethod
Thedualcost-allocationmethodclassifiescostsintotwopools,avariablecostpoolandafixedcostpool.
2.Usingthesingle-ratemethodtransformsthefixedcostsperhourintoavariablecosttousersofthatfacility.
Answer:
TrueDifficulty:
3Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
3.Thesingle-ratecost-allocationmethodprovidesbetterinformationfordecisionmakingthanthedual-ratemethod.
Answer:
FalseDifficulty:
2Objective:
1
TermstoLearn:
single-ratecost-allocationmethod,dual-ratecost-allocationmethod
Thedual-ratecost-allocationmethodprovidesbetterinformationfordecisionmakingthanthesingle-ratemethod.
4.Anadvantageofthesingle-ratemethodisthatitiseasierandalwaysthemostaccuratecost-allocationchoice.
Answer:
FalseDifficulty:
2Objective:
1
TermstoLearn:
single-ratemethod
Thesingle-ratemethodistheeasiestcostallocationmethod,butitistheleastaccuratecost-allocationchoice.
5.Whenbudgetedcost-allocationratesareused,user-divisionmanagersfaceuncertaintyabouttheallocationratesforthatbudgetperiod.
Answer:
FalseDifficulty:
2Objective:
2
TermstoLearn:
single-ratecost-allocationmethod,dual-ratecost-allocationmethod
Whenbudgetedcost-allocationratesareused,user-divisionmanagersfacenouncertaintyabouttheallocationratesforthatbudgetperiod.
6.Whenbudgetedcost-allocationratesareused,managersofthesupplierdivisionaremotivatedtoimproveefficiency.
Answer:
TrueDifficulty:
2Objective:
2
TermstoLearn:
single-ratecost-allocationmethod,dual-ratecost-allocationmethod
7.Whenbudgetedcost-allocationratesareused,variationsinactualusagebyonedivisionaffectthecostsallocatedtootherdivisions.
Answer:
FalseDifficulty:
2Objective:
2
TermstoLearn:
single-ratecost-allocationmethod,dual-ratecost-allocationmethod
Whenactualcost-allocationsratesareused,variationsinactualusagebyonedivisionaffectthecostsallocatedtootherdivisions.
8.Theonlychoicesthatafirmhasforsupportdepartmentcostallocationratesaretouseeitherabudgetedrateoranactualrate.
Answer:
FalseDifficulty:
2Objective:
2
TermstoLearn:
single-ratemethod,dual-ratemethod
Thechoicesafirmhasforsupportdepartmentcostallocationratesincludeusingabudgetedrate,anactualrate,orsomenegotiatedrate.
9.Thedirectallocationmethodhighlightsrecognitionofservicesrenderedbysupportdepartmentstoothersupportdepartments.
Answer:
FalseDifficulty:
2Objective:
3
TermstoLearn:
directallocationmethod
Thedirectallocationmethodallowsfornorecognitionofservicesrenderedbysupportdepartmentstoothersupportdepartments.
10.Thereciprocalallocationmethodincorporatesmutualservicesprovidedamongallsupportdepartments.
Answer:
TrueDifficulty:
2Objective:
3
TermstoLearn:
reciprocalallocationmethod
11.Budgetedamountsforasupportdepartmentwillalwaysexceedcompletereciprocatedcostsforthatdepartment.
Answer:
FalseDifficulty:
3Objective:
3
TermstoLearn:
completereciprocatedcosts,supportdepartment
Completereciprocatedcostsequalbudgetedamountsforthesupportdepartmentplusanyinterdepartmentalcostallocations,therefore,completereciprocatedcostsalwaysexceedbudgetedamounts.
12.Thedirectallocationmethodprovideskeyinformationforoutsourcingdecisionsregardingsupportservices.
Answer:
FalseDifficulty:
3Objective:
3
TermstoLearn:
supportdepartment,directallocationmethod
Completereciprocalcostsofasupportdepartmentprovidekeyinformationforoutsourcingdecisionsregardingsupportservices.Thedirectallocationmethoddoesnotprovidethisinformation.
13.Theincrementalmethodofallocatingcommoncostsoftencreatestheincentivetobethefirst-rankeduser.
Answer:
FalseDifficulty:
3Objective:
3
TermstoLearn:
incrementalcost-allocationmethod
Theincrementalmethodcreatesadisincentivetobethefirst-rankeduserbecausethefirst-rankeduserreceivesthegreatestallocationofcost.
14.Thedirectmethodallocateseachsupportdepartment’scoststooperatingdepartmentsandtosupportdepartments.
Answer:
FalseDifficulty:
2Objective:
3
TermstoLearn:
directmethod
Thedirectmethodallocateseachsupportdepartment’scoststooperatingdepartmentsbutnottoothersupportdepartments.
15.Thestep-downmethodallocatessupportdepartmentcoststoothersupportdepartmentsandtooperatingdepartmentsinasequentialmanner.
Answer:
TrueDifficulty:
2Objective:
3
TermstoLearn:
step-downmethod
16.Thereciprocalmethodofsupportdepartmentcostallocationisthemostprecisemethodandthereforeisusedmostoften.
Answer:
FalseDifficulty:
2Objective:
3
TermstoLearn:
reciprocalmethod
Thereciprocalmethodofsupportdepartmentcostallocationisthemostprecisemethodbutisnotoftenusedduetoitsrelativecomplexity.
17.Thestand-alonemethodofallocatingcommoncostsemphasizesfairnessandequityamongusers.
Answer:
TrueDifficulty:
2Objective:
4
TermstoLearn:
stand-alonecost-allocationmethod
18.Undertheincrementalmethod,thefirstincrementaluserusuallyreceivesthehighestallocationofthecommoncosts.
Answer:
FalseDifficulty:
2Objective:
4
TermstoLearn:
incrementalcost-allocationmethod
Undertheincrementalmethodofallocatingcommoncosts,theprimaryuserreceivesthehighestallocationofthecommoncosts.
19.Acommoncostisacostofoperatingafacilityoractivitythatissharedbytwoormoreusers.
Answer:
TrueDifficulty:
2Objective:
4
TermstoLearn:
commoncost
20.Thestand-alonecostallocationmethodrankstheindividualusersofacostobjectinorderofusersmostresponsibleforacommoncostandthenusestheserankingstoallocatethecostsamongtheusers.
Answer:
TrueDifficulty:
2Objective:
4
TermstoLearn:
stand-alonecost-allocationmethod
MULTIPLECHOICE
21.Themethodthatallocatescostsineachcostpoolusingthesamerateperunitisknownasthe:
a.incrementalcost-allocationmethod
b.reciprocalcost-allocationmethod
c.single-ratecostallocationmethod
d.dual-ratecost-allocationmethod
Answer:
cDifficulty:
2Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
22.Thedual-ratecost-allocationmethodclassifiescostsineachcostpoolintoa:
a.budgeted-costpoolandanactual-costpool
b.variable-costpoolandafixed-costpool
c.used-capacity-costpoolandapractical-capacity-costpool
d.direct-costpoolandareciprocal-costpool
Answer:
bDifficulty:
1Objective:
1
TermstoLearn:
dual-ratecost-allocationmethod
23.Thesingle-ratecost-allocationmethodmaybasethedenominatorchoiceon:
a.master-budgetcapacityutilization
b.normalcapacityutilization
c.practicalcapacity
d.Alloftheseanswersarecorrect.
Answer:
dDifficulty:
2Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
24.Whenusingthesingle-ratemethod,fixedcostallocationmaybebasedon:
a.actualusage
b.budgetedusage
c.incrementalcostallocation
d.Eitheraorbarecorrect.
Answer:
dDifficulty:
1Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
25.Benefitsofthesingle-ratemethodinclude:
a.thelowcostofimplementation
b.fixedcoststhataretransformedintovariablecostsforuserdecisionmaking
c.signalsregardinghowvariableandfixedcostsbehavedifferently
d.informationthatleadstooutsourcingdecisionsthatbenefittheorganizationasawhole
Answer:
aDifficulty:
3Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
26.Benefitsofthedual-ratemethodinclude:
a.variablecoststhataretransformedintofixedcostsforuserdecisionmaking
b.thelowcostofimplementation
c.avoidanceofexpensiveanalysisforcategorizingcostsaseitherfixedorvariable
d.informationthatleadstooutsourcingdecisionsthatbenefittheorganizationasawhole
Answer:
dDifficulty:
3Objective:
1
TermstoLearn:
dual-ratecost-allocationmethod
THEFOLLOWINGINFORMATIONAPPLIESTOQUESTIONS36THROUGH39:
TheBonawitzCorporationhasacentralcopyingfacility.Thecopyingfacilityhasonlytwousers,theMarketingDepartmentandtheOperationsDepartment.Thefollowingdataapplytothecomingbudgetyear:
Budgetedcostsofoperatingthecopyingfacility
for200,000to300,000copies:
Fixedcostsperyear$30,000
Variablecosts3cents(.03)percopy
Budgetedlong-runusageincopiesperyear:
MarketingDepartment60,000copies
OperationsDepartment190,000copies
Budgetedamountsareusedtocalculatetheallocationrates.
ActualusagefortheyearbytheMarketingDepartmentwas40,000copiesandbytheOperationsDepartmentwas180,000copies.
27.Ifasingle-ratecost-allocationmethodisused,whatamountofcopyingfacilitycostswillbebudgetedfortheMarketingDepartment?
a.$9,000
b.$1,800
c.$7,200
d.$8,400
Answer:
aDifficulty:
2Objective:
1
TermstoLearn:
single-ratecost-allocationmethod
[(60,000/(60,000+190,000))x$30,000]+(60,000x$0.03)=$9,000
28.Ifasingle-ratecost-allocationmethodisused,whatamountofcopyingfacilitycostswillbeallocatedtotheMarketingDepartment?
Assumeactualusageisusedtoallocatecopyingcosts.
a.$8,400
b.$9,000
c.$6,000
d.$4,800
Answer:
cDifficulty:
3Objective:
1
Termst
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