Fundamentals of Cost and Management Accounting
Part Four: Allocation of Support Department Costs, Common Costs and Revenues
Exercise No. 4
الاسم: الرقم الأكاديمي: رقم الشعبة:
Choose the best answer for every question of the following questions:
1) Max's Movie Store encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the movie videos are sold as a single package. Managers at Max's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:
| Stand-Alone Selling Price, |…show more content…
Explanation: A) [$25 / ($25 + $30)] x $44 = $20
8) Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis.
Explanation: D) $25 since Reading Fun is the primary product.
9) Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Math Fun in the package that contains all three products?
Explanation: C) [$30 / ($25 + $30 + $45)] × $76 = $22.80
10) Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products?
Explanation: C) $44 - $25 primary product = $19
11) The Maintenance Department has been servicing Gizmo Production for four years. Beginning next year, the company is adding a Scrap-Processing Department to recycle the materials from Gizmo Production. As a result, maintenance costs are expected to increase from $480,000 per year to $500,000 per year. The Scrap-Processing Department