Question

In: Accounting

45. The step method allocates costs of service departments to a. other service departments. b. producing departments....

45. The step method allocates costs of service departments to

a.	other service departments.
b.	producing departments.
c.	joint products.
d.	other service departments and producing departments.

46. What is the firststep in allocating service department costs to production departments?

a.	Assign overhead costs that are directly attributable to a service or production department.
b.	Allocate other overhead costs based on appropriate cost drivers.
c.	Allocate service department costs to production departments.
d.	None of the answers is correct.

Stephanie Company

Stephanie Company has two production departments: D and J. Stephanie also has 3 service departments: Personnel, Administration, and Shipping. Shipping costs are allocated on the basis of number of packages, while Personnel and Administration costs are allocated using number of employees. Assume that the ranking of the benefits provided is in the order listed below.

Department	Costs	Employees	# of Packages
Personnel	$400,000	6	3,000
Administration	800,000	20	4,000
Shipping	700,000	12	24,500
D	500,000	10	5,000
J	400,000	15	6,000

47. Refer to Stephanie Company. Using the direct method, what amount of personnel costs is allocated to Department J (rounded to the nearest $)?

a.	$120,000
b.	$240,000
c.	$300,000
d.	$360,000

48. Refer to Stephanie Company. Using the step method, what amount of Personnel costs is allocated to Department D (rounded to the nearest $)?

a.	$ 70,175
b.	$105,263
c.	$157,895
d.	$240,000

49. Refer to Stephanie Company. Using the step method, what amount of Shipping costs is allocated to Department J (rounded to the nearest $)?

a.	$ 97,561
b.	$216,216
c.	$280,000
d.	$643,784

50. Applying the techniques of activity-based costing typically results in identifying which of the following?

a.	less accurate cost-allocation bases (cost drivers).
b.	as accurate cost-allocation bases (cost drivers).
c.	more accurate cost-allocation bases (cost drivers).
d.	None of the answers is correct.

Solutions

Expert Solution

45.

The step method allocates cost of service departments to other service department and producing department.

Hence option d is correct.

46.

The first step in allocating service department cost to production departments is assign overhead cost that directly attributable to a service or production department.

Hence option a is correct.

47.

Personnel cost allocated to department J under direct method is = $400,000*15/25 = $240,000

Hence option b is correct.

Step method of departmental cost allocation
	Personnel	Administration	Shipping	D	J
Departmental cost	$400,000	$800,000	$700,000	$500,000	$400,000
Allocation:
Personnel cost 20:12:10:15 =57	-400,000	140,351	84,211	70,175	105,263
Administration cost 12:10:15=37		-940,351	304,979	254,149	381,223
Shipping cost 5:6=11			-1,089,190	495,086	594,104

48.

Personnel cost allocated to department D under step method is = $70,175

49.

Shipping cost allocated to department J under step method is = $594,104

50.

Applying techniques of activity based costing typically results in identifying more accurate cost allocation bases (cost drivers).

Hence option c is correct.

ekkarill92 answered 1 year ago

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