Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN: 9781337115773

Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher: Cengage Learning

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Textbook Question

Chapter 4, Problem 21MCQ

(Appendix 4B) The method that assigns support department costs by giving full recognition to support department interactions is known as

a. the sequential method.
b. the proportional method.
c. the reciprocal method.
d. the direct method.
e. None of these.

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Chapter 4, Problem 20MCQ

Chapter 4, Problem 22BEA

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The only method of allocation of service department costs to producing departments that considers reciprocal services is called the a. Step method b. Direct method c. none of the choices d. Algebraic method

Which of the following statements is (are) false regarding the direct method of allocating service department costs? (A) The selection of an allocation base in the direct method is easier than the selection of an allocation base in the step method. (B) Once an allocation is made from a service department using the direct method, no further allocations are made back to that department.

S1 - After service department costs are allocated to other departments, costs are re-circulated back to that service department, under the step method. S2 - When using the direct method of allocating service department costs, it is necessary that the cost of the service department which serves the greatest number of departments is allocated first. a. Only S1 is true b. Only S2 is true c. Both S1 & S2 are true d. Both S1 & S2 are false

Chapter 4 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making

Ch. 4 - What are job-order costing and process costing?...Ch. 4 - Give some examples of service firms that might use...Ch. 4 - What is normal costing? How does it differ from...Ch. 4 - Why are actual overhead rates seldom used in...Ch. 4 - Explain how overhead is assigned to production...Ch. 4 - What is underapplied overhead? When Cost of Goods...Ch. 4 - What is overapplied overhead? When Cost of Goods...Ch. 4 - Suppose that you and a friend decide to set up a...Ch. 4 - Why might a company decide to use departmental...Ch. 4 - What is the role of materials requisition forms in...

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(Appendix 4B) The method that assigns support department costs only to producing departments in proportion to each departments usage of the service is known as a. the sequential method. b. the proportional method. c. the reciprocal method. d. the direct method. e. None of these.

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?

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?

Why is the diect method of support department cost allocation less accurate than the sequential and reciproval services methods?

How does management determine the order in which support department costs are allocated under the sequential method?

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?

(Appendix 4B) Describe the difference between producing and support departments.

Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments? a. Method of Algebra b. Step method c. Indirect method d. direct method e. None of the above

Which one of the following statements is incorrect? A. The reciprocal method is rarely used in practice, since the computations are relatively complex. B. In the step method, any amount of the allocation base that is attributable to a service department whose cost has already been allocated, is ignored. C. Under the direct method, the amount of the allocation base attributable to the service and operating departments are used in the allocation. D. Sales have been a favourite allocation base for service department costs since it is simple, straightforward and easy to work with.

Which of the following methods recognizes some (but not all) of the services that occur between service departments? Indirect method. Step-down method. Reciprocal-services method. Dual-cost allocation method. Direct method.

64. Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments? a• Method of Algebra b• Step method c• Indirect method d• direct method e• None of the above