Kizzle’s Crepes Co. produces world famous crepes. The company’s crepes are produced via its Mixing and Cooking activities, which both rely on the Janitorial and Maintenance activities. Kizzle’s management knows the most practical driver of Janitorial costs is square feet, but is uncertain whether to allocate Maintenance costs based on asset value of production equipment, number of service calls, or machine hours. Kizzle’s management estimates that the Cooking and Mixing activities each require about twice as much space as the Maintenance activity. 1. Identify the base for choosing the cost driver. a. The company needs to choose a driver that can be measured practically. b. The company needs to choose the driver that matches the department activity. c. The company needs to choose the driver that matches the support department function. d. All the above. Identify the driver which cannot be used as cost driver for maintenance cost. a. Square feet. b. Number of service calls. c. Machine hours. d. Asset value of equipment. 2. Assume that Kizzle’s management allocates Maintenance costs based on the number of service calls. Further assume that in a given period, the Janitorial, Mixing, and Cooking activities incur 16, 40, and 24 service calls, respectively, and that the Janitorial and Maintenance costs of that period are $3,000 and $4,200, respectively. Determine the total costs allocated from each support activity to the other three activities using the reciprocal services method. Maintenance cost allocation: Janitorial: $fill in the blank 3 Mixing: $fill in the blank 4 Cooking: $fill in the blank 5 Janitorial cost allocation: Maintenance: $fill in the blank 6 Mixing: $fill in the blank 7 Cooking: $fill in the blank 8 3. The company is considering changing from the reciprocal service method to a simpler method. Why should the company continue with the reciprocal service method? a. It is complex, but more accurate. b. It can be practiced if the company has sufficient resources and capacity. c. The simpler cost allocation methods are less accurate. d. All the above.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Support Activity Cost Allocation
Kizzle’s Crepes Co. produces world famous crepes. The company’s crepes are produced via its Mixing and Cooking activities, which both rely on the Janitorial and Maintenance activities. Kizzle’s management knows the most practical driver of Janitorial costs is square feet, but is uncertain whether to allocate Maintenance costs based on asset value of production equipment, number of service calls, or machine hours. Kizzle’s management estimates that the Cooking and Mixing activities each require about twice as much space as the Maintenance activity.
1. Identify the base for choosing the cost driver.
a. The company needs to choose a driver that can be measured practically.
b. The company needs to choose the driver that matches the department activity.
c. The company needs to choose the driver that matches the support department function.
d. All the above.
Identify the driver which cannot be used as cost driver for maintenance cost.
a. Square feet.
b. Number of service calls.
c. Machine hours.
d. Asset value of equipment.
2. Assume that Kizzle’s management allocates Maintenance costs based on the number of service calls. Further assume that in a given period, the Janitorial, Mixing, and Cooking activities incur 16, 40, and 24 service calls, respectively, and that the Janitorial and Maintenance costs of that period are $3,000 and $4,200, respectively. Determine the total costs allocated from each support activity to the other three activities using the reciprocal services method.
Maintenance cost allocation:
| Janitorial: | $fill in the blank 3 | |
| Mixing: | $fill in the blank 4 | |
| Cooking: | $fill in the blank 5 |
Janitorial cost allocation:
| Maintenance: | $fill in the blank 6 | |
| Mixing: | $fill in the blank 7 | |
| Cooking: | $fill in the blank 8 |
3. The company is considering changing from the reciprocal service method to a simpler method. Why should the company continue with the reciprocal service method?
a. It is complex, but more accurate.
b. It can be practiced if the company has sufficient resources and capacity.
c. The simpler cost allocation methods are less accurate.
d. All the above.
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