hich of the following statements regarding the allocation of cost from other departments to the ultiple operating departments of a large firm is/are true? When allocating costs of departments such as Marketing and Logistics to the operating departments of the firm, the direct method should always be used (instead of the reciprocal or step-down method). When allocating costs of departments such as Legal, Information Technology and Human always ho

hich of the following statements regarding the allocation of cost from other departments to the ultiple operating departments of a large firm is/are true? When allocating costs of departments such as Marketing and Logistics to the operating departments of the firm, the direct method should always be used (instead of the reciprocal or step-down method). When allocating costs of departments such as Legal, Information Technology and Human always ho

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 2CMA

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Explain why either normal or peak capacity of the producing (or user) departments should be used to allocate the fixed costs of support departments.
Are large or small companies more likely to use the reciprocal services method to allocate support department costs production department? Why?
What are the two most frequently used methods of distributing service department costs to production departments?
Internal costs that are charged to the segments of a business are called_______. A. controllable costs B. variable costs C. fixed costs D. allocated costs
Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering hours h. Direct labor hours i. Scope j. Product configuration k. Quality management approach l. Number of receiving orders m. Number of defective units n. Employee experience o. Types of process technologies p. Number of purchase orders q. Type and efficiency of layout r. Scale s. Number of functional departments t. Number of planning meetings
As manager of department B in MarIeys Manufacturing, based on the costs you identified in the previous exercise for further research, how does this impact the financial performance of your department, and what might be some questions you want to ask or solutions you might propose to Marleys management?
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.
The second stage of customer-based activity-based costing entails the assignment of: a. resource costs to sales departments. b. resources costs to distribution channels. c. customer-related activity costs to products. d. customer-related activity costs to customers.
Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same. The following additional information is available: a.Does the operating income (loss) for the two divisions accurately measure performance? Explain. b.Correct the divisional income statements, using appropriate support department cost drivers.
In determining the costs transferred to a third department from a second department, are the costs from a first department considered? Are they considered in the computation of the ending work in process in the second department?
When the manager has the responsibility and authority to make decisions that affect Costs and revenues but no responsibility for or authority over assets invested in the department, the department is called: A. A cost center B. A profit center C. An investment center D. A service department
How can support department and joint cost allocation affect production employee performance evaluations?