8) When choosing between using budgeted rates, and actual rates, which of the following is TRUE?
A) Actual rates let users know in advance what their costs are.
B) When budgeted rates are used, users must wait till the end of the budget period to know what their costs are.
C) With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances.
D) Budgeted rates based on user department estimates may lead to outsourcing needed work, rather than relying on an internal support department.
E) Budgeted rates may help the manager of a support department to improve efficiency.
9) Fixed cost allocation rates should be determined using
A) past production capacity.
B) short-term average usage.
C) short-term expected usage.
D) long-term expected usage.
E) actual usage.
Use the information below to answer the following question(s).
We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used.
|
Department |
Capacity Available in Hours |
Capacity Used in Hours |
|
Barbell Department |
500 |
400 |
|
Sauna Department |
300 |
400 |
For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
10) The fixed and variable costs allocated to the Barbell Department are
A) $50,000 and $75,000, respectively.
B) $50,000 and $60,000, respectively.
C) $30,000 and $75,000, respectively.
D) $30,000 and $60,000, respectively.
E) $30,000 and $50,000 respectively.
11) The fixed and variable costs allocated to the Sauna Department are
A) $50,000 and $75,000, respectively.
B) $50,000 and $60,000, respectively.
C) $30,000 and $75,000, respectively.
D) $30,000 and $50,000, respectively.
E) $30,000 and $60,000 respectively.
12) Assuming that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Barbell Department will be
A) $30,000 and $50,000, respectively.
B) $30,000 and $60,000, respectively.
C) $30,000 and $75,000 respectively.
D) $40,000 and $60,000, respectively.
E) $60,000 and $40,000, respectively.
13) Assuming that that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Sauna Department will be
A) $30,000 and $50,000, respectively.
B) $30,000 and $60,000, respectively.
C) $30,000 and $75,000 respectively.
D) $40,000 and $60,000, respectively.
E) $60,000 and $40,000, respectively.
14) An advantage to using budgeted usage, rather than actual usage, for the allocation base is that
A) GAAP/IFRS requires it for comparability to previous years.
B) variable costs are lower.
C) management does not have to be accountable for actual costs since the system only deals with budgeted costs.
D) it is consistent with a short-run time horizon.
E) user divisions will know their allocated costs in advance.
15) A disadvantage of allocating fixed costs using a budgeted rate and actual usage is that
A) supplying division managers may be tempted underestimate usage.
B) the allocation would capture the cause-and-effect relationship.
C) variation in usage will result in variances that need to be managed.
D) changes in one department's usage should not affect another department's allocation.
E) some organizations offer rewards to managers who make accurate forecasts.
16) Which of the following could be described as a department that adds value to a product or service, which is observable by a customer?
A) a personnel department
B) an assigned department
C) a support department
D) a service department
E) an operating department
17) Which of the following does NOT apply to support departments?
A) A support department is not an operating department.
B) Support departments create special accounting problems when they provide reciprocal support to each other.
C) An example of a support department would be a personnel department.
D) To obtain accurate product costs requires the inclusion of support department costs.
E) Direct support costs are always traced, indirect support department costs are allocated.
18) To discourage unnecessary use of a support department, management might
A) not allocate any support department costs to user departments.
B) allocate support department costs based upon user department usage.
C) allocate a fixed amount of support department costs to each department regardless of use.
D) issue memos on useful services provided by the support department.
E) allocate only variable costs based on budgeted usage.
19) The costs of unused capacity are highlighted when
A) actual usage based allocations are used.
B) budgeted usage allocations are used.
C) practical capacity based allocations are used.
D) the dual-rate cost allocation method allocates fixed costs based on actual usage.
E) variable cost variances are evaluated.
