Use the following data to prepare a model that allocates the support departments using the three methods (direct, sequential, and reciprocal). Pay attention to the following instructions: 1. You should design your model to include an input section, an output section, and user instructions. 2. The output section should have nothing but references and formulas in it. 3. For the sequential method, allocate the support department with the highest cost first. 4. For the reciprocal method, either calculate the reciprocal amounts using a formula in Excel or use iterative equations to calculate the amounts. Do NOT type the amounts in. Support Departments Producing Departments Assembly $45,000 5,300 General Factory $325,000 Receiving $160,000 3,400 Finishing $72,000 4,700 Departments Direct Overhead Square Footage # of Receiving Orders 300 1,650 2,050

Use the following data to prepare a model that allocates the support departments using the three methods (direct, sequential, and reciprocal). Pay attention to the following instructions: 1. You should design your model to include an input section, an output section, and user instructions. 2. The output section should have nothing but references and formulas in it. 3. For the sequential method, allocate the support department with the highest cost first. 4. For the reciprocal method, either calculate the reciprocal amounts using a formula in Excel or use iterative equations to calculate the amounts. Do NOT type the amounts in. Support Departments Producing Departments Assembly $45,000 5,300 General Factory $325,000 Receiving $160,000 3,400 Finishing $72,000 4,700 Departments Direct Overhead Square Footage # of Receiving Orders 300 1,650 2,050

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 3E

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Similar questions

Which of the following is a benefit of activity-based cost management system? a.It makes it easy to identify the overall activities that bear an influence on cost. b.It is inexpensive. c.It enhances strategic planning. d.It ensures allocation of all costs on the basis of machine hours.
Using the step method to allocate the service center costs, what is the total cost of programming and classes?
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.
The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?
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
Which of the following statements about ABC is not correct? answer choices When forming activity cost pools, the goal is to create as few cost pools as possible, while still capturing major activities. Activity-based costing classifies activities into two categories—either unit-level activities or facility level activities. An activity cost driver should ideally have a cause-and-effect relationship with the underlying activity. To compute an activity rate, divide the total activity cost by the total activity driver.
For each of the following support departments, identify a cost driver that could be used for allocating the support department costs to the profit center:a. Legalb. Duplication servicesc. Electronic data processingd. Central purchasinge. Telecommunicationsf. Accounts receivable
Which of the following statements is true? When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost. Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours. Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures. The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs. Statements I, II, and III are true. Statements I and III are true. All of the statements are true. Statements II and III are true.
What are the differences between single and dual rate allocation? Explain with suitable examples. b) Provide a numerical example for single rate allocation and dual rate allocation and explain the process of allocating support department costs to the operating department, assuming that: The company has two support departments “S1 & S2” and two operating departments “O1 & O2.” The company use the direct method to allocate support department costs. Note: You are required to provide numerical examples assuming the values of your own and they should not be copied from any sources.
For production and support departments, a method of implementing cost centers that is input-oriented is the: Multiple Choice Discretionary-cost method. Engineered-cost method. Cost shifting method. Outsourcing method. Budget slack method.
Which of the following statements is true with regard to activity-based costing? Multiple Choice Activity rates are computed by dividing budgeted activity usage by budgeted activity cost. The basic principle underlying activity-based costing is that activities are what cause overhead cost to be incurred. Activity-based costing often results in low-volume complex products being undercosted, and high-volume simpler products being overcosted. All cost drivers used to determine the rates will be unit-level drivers. Activity-based costing rates are the same as departmental overhead rates.
a) You are developing schedule estimates (and costs). Why should you document assumptions and not just show the generated baseline schedule and budget alone? b) Someone suggest you build your WBS by going to each functional department and meeting with a representative to get their take on required work packages, precedencies, and durations. Why might you decline to follow this advice if you want to have a successful project? c) You have recently been promoted to the position of project manager at your company. Your team consist of senior members of the technical staff, and it is time to set up the team operating rules. You expect some resistance because they see you as “wet behind the ears.” How would you go about doing this?