Question

1)

An example of central corporate support costs includes _____.

A) tax planning department

B) human resources department

C) maintenance department

D) company cafeteria

2)

The use of actual cost rates for allocating variable costs of service departments protectsthe user departments from inefficiencies in service departments.

A) TRUE

B) FALSE

3)

The preferred cost driver for allocating central corporate support costs to products is either actual or estimated usage.

A) TRUE

B) FALSE

4)

Joint costs from producing multiple products are allocated to main products and to by-products.

A) TRUE

B) FALSE

5)

When using the step-down method of allocating service department costs, service departments provide support activities to ______.

A) producing departments only

B) producing departments and other service departments

C) service departments only

D) producing departments and corporate central offices only

Answer 1

Hi,

Answer:1 : Central corporate support costs are those which are not directly related to the services provided by company.

in general these costs are included by company in addition to direct cots

in the above question company cafeteria is the support costs.

Answer 2: Variable overhead is analysed with two variances. which are

Variable overhead efficiency variance : This is the difference between actual and budgeted hours worked.

Variable overhead spending variance; This is the difference between actual spending and budgeted spending.

In general actual rates are used to allocate the variable overheads to production and variances are calculated using the budgeted. There fore above statement is false

Answer 4: Joint costs are the costs incurred in joint process to create more than one product.

The costs incurred upto split point are to be allocated based on sales value or margin on the products

The costs incurred after split point are to specific to product level and directly can be allocated

Therefore the above statement is true joint costs upto split off point are to be allocated to joint and by products based on either gross sales value or gross margin basis.

Answer 5 : (B) The step down method is the allocation of costs to operating departments as well as service departments

The cost allocation under this method is a sequential process. It begins with the allocation of costs of the service department that provides the greatest amount of service to other departments.