7 the step down allocation method a typically begins with the support department tha 4309345

7) The step-down allocation method:

A) typically begins with the support department that provides the highest percentage of its total services to other support departments

B) recognizes the total amount of services that support departments provide to each other

C) allocates complete reciprocated costs

D) offers key input for outsourcing decisions

8) The reciprocal allocation method:

A) is the most widely used because of its simplicity

B) requires the ranking of support departments in the order that the allocation is to proceed

C) is conceptually the most precise

D) results in allocating more support costs to operating departments than actually incurred

9) Complete reciprocated costs:

A) are less than the support department's own costs

B) include the support department's costs plus any interdepartmental cost allocations

C) are used for step-down allocations

D) are also referred to as budgeted costs

Answer the following questions using the information below:

Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

	Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$320,000	$80,000	$160,000	$240,000
Budgeted maintenance-hours	NA	800	960	640
Number of employees	40	NA	160	480

 

10) Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

A) $96,000

B) $128,000

C) $156,000

D) $192,000

11) Using the direct method, what amount of Personnel Department costs will be allocated to Department B?

A) $20,000

B) $32,000

C) $48,000

D) $60,000

12) Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $64,000

B) $85,333

C) $114,667

D) $128,000

13) Using the direct method, what amount of Maintenance Department costs will be allocated to Department A?

A) $96,000

B) $128,000

C) $166,000

D) $192,000

14) Using the direct method, what amount of Personnel Department costs will be allocated to Department A?

A) $20,000

B) $32,000

C) $48,000

D) $60,000

15) Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $64,000

B) $85,333

C) $114,667

D) $128,000

Answer the following questions using the information below:

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $150,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:

16) Using the direct method, what amount of Warehouse Department costs will be allocated to Department Books?

A) $140,000

B) $210,000

C) $150,000

D) $175,000

17) Using the direct method, what amount of Data Center Department costs will be allocated to Department Music?

A) $150,000

B) $66,667

C) $83,333

D) $60,000

18) Using the step-down method, what amount of Data Center Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $50,000

B) $150,000

C) $15,000

D) $0

19) Using the step-down method, what amount of Warehouse Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $233,333

B) $116,667

C) $243,333

D) $121,667

20) Using the step-down method, what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $117,342

B) $66,667

C) $92,592

D) $8