Answered: Give examples of allocation bases used…

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Accounting

Give examples of allocation bases used to allocate support-department cost pools to operating departments.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 15Q: What are the two most frequently used methods of distributing service department costs to production...

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Give examples of allocation bases used to allocate support-department cost pools to operating departments.

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How does management determine the order in which support department costs are allocated under the sequential method?
The actions listed next are associated with either an activity-based operational control system or a traditional operational control system: a. Budgeted costs for the maintenance department are compared with the actual costs of the maintenance department. b. The maintenance department manager receives a bonus for beating budget. c. The costs of resources are traced to activities and then to products. d. The purchasing department is set up as a responsibility center. e. Activities are identified and listed. f. Activities are categorized as adding or not adding value to the organization. g. A standard for a products material usage cost is set and compared against the products actual materials usage cost. h. The cost of performing an activity is tracked over time. i. The distance between moves is identified as the cause of materials handling cost. j. A purchasing agent is rewarded for buying parts below the standard price set by the company. k. The cost of the materials handling activity is reduced dramatically by redesigning the plant layout. l. An investigation is undertaken to find out why the actual labor cost for the production of 1,000 units is greater than the labor standard allowed. m. The percentage of defective units is calculated and tracked over time. n. Engineering has been given the charge to find a way to reduce setup time by 75 percent. o. The manager of the receiving department lays off two receiving clerks so that the fourth-quarter budget can be met. Required: Classify the preceding actions as belonging to either an activity-based operational control system or a traditional control system. Explain why you classified each action as you did.
Describe the concept of a cost center and, using a specific organization, give an example of how this might be used to achieve the strategic goals of the organization.
When using the sequential distribution method of distributing service department costs, if a service department receives services from other service departments, will those costs be allocated back to it even though it was the first service department distributed?
How can support department and joint cost allocation affect production employee performance evaluations?
When using the sequential distribution method of distributing service department costs, if each of two service departments services the same number of other departments, how is it determined as to which service department to allocate first?
Why is the diect method of support department cost allocation less accurate than the sequential and reciproval services methods?
What are the two most frequently used methods of distributing service department costs to production departments?
What are support departments, and why are their costs allocated to other departments? What process is used to allocate support department costs?
Explain briefly the main differences between the direct, step-down, and reciprocal-services methods of service department cost allocation.
Compare and explain differences in the support-department costs allocated to each operating department.
Which of the following principles should be applied when the step method of allocating service department costs is used? The sequence of allocation among departments should be randomly selected. The sequence of allocation among departments should proceed from the largest department as measured by total assets to the smallest. The sequence of allocation among departments should proceed from the largest provider of interdepartmental services to the smallest. All possible sequences of service department allocations should be computed. The sequence that provides the largest allocation of service costs should then be selected.