Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. The cafeteria cost charges to the Auto division, and Truck division.

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Answer 1

Question

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

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Problem 11-22 (Algo) Service Department Charges [LO11-4] Sharp Motor Company has a cafeteria that serves two operating divisions-an Auto Division and a Truck Division. The costs of operating the cafeteria are budgeted at $87,000 per month plus $0.80 per meal served. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 63% of the peak- period requirements, and the Truck Division is responsible for the other 37%. For June, the Auto Division estimated it would need 81,000 meals, and the Truck Division estimated it would need 51,000 meals. However, due to unexpected layoffs of employees during the month, only 51,000 meals were served to the Auto Division. Another 51,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $96,000 and its actual meal costs totaled $99,600. Required: 1. How much cafeteria cost should be charged to each division for June? 2. Assume the company…

Service Department Charges Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $40,000 per month plus $3 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 65% of the peak-period requirements, and the Truck Division is responsible for the other 35%. For June, the Auto Division estimated it would need 35,000 meals served, and the Truck Division estimated it would need 20,000 meals served. However, due to unexpected layoffs of employees during the month, only 20,000 meals were served to the Auto Division. Another 20,000 meals were served to the Truck Division as planned. Cost records in the cafeteria show that actual fixed costs for June totaled $42,000 and actual meal costs totaled $128,000. Required: 1.…

Service Department Charges Korvanis Corporation operates a Medical Services Department for its employees. Charges to the company’s operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating department. Variable Medical Services Department costs are budgeted at $80 per employee. Fixed Medical Services Department costs are budgeted at $400,000 per year. Actual Medical Services Department costs for the most recent year were $41,000 for variable costs and $408,000 for fixed costs. Data concerning employees in the three operating departments follow: Required: 1. Determine the Medical Services Department charges for the year to each of the operating departments—Cutting, Milling, and Assembly. 2. How much, if any, of the actual Medical Services Department costs for the year…

Answer 2

Question

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

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Answer 3

Question

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

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Answer 4

Question

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

Answer 6

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

Answer 7

Chapter 11, Problem 22P

1.

To determine

Concept Introduction:

Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation.

The cafeteria cost charges to the Auto division, and Truck division.

Answer 8

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

Answer 9

2.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.

Answer 10

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

Answer 11

3.

To determine

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).

Answer 12

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

Answer 13

4.

To determine

Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.

Answer 14

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Answer 16

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Answer 17

Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - Prob. 6Q Ch. 11 - Prob. 7Q Ch. 11 - Prob. 8Q Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs. The criticism of the allocation method used in Part (2).

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Chapter 11 Solutions

Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.

The criticism of the allocation method used in Part (2).