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COST ACCOUNTING 13 EDITION HORNGREN (CHAPTER 15 QUIZ AND EXERCISES) CHAPTER 15 SUPPORT DEPARTMENT, COMMON COST, AND REVENUE ALLOCATIONS (INSTANT DOWNLOAD)

COST ACCOUNTING 13 EDITION HORNGREN (CHAPTER 15 QUIZ AND EXERCISES) CHAPTER 15 SUPPORT DEPARTMENT, COMMON COST, AND REVENUE ALLOCATIONS (INSTANT DOWNLOAD)
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Solution Guide / Answer Key:

Accounting

Cost Accounting 13/e

Horngren, Foster, Datar, Rajan & Ittner

 

CHAPTER 15 QUIZ

 

1.       The use of a dual-rate cost-allocation method recognizes

 

a.       the improvements in technology allowing for use of multiple cost pools.

b.       the need to use both budgeted and actual cost rates when allocating.

c.       the need to use both budgeted and actual usage of quantities when allocating.

d.   the behavior aspect of costs.

 

2.       Managers are affected by risks they have to take and would prefer to use

 

a.       actual rates for cost allocation because the rates are calculated from real amounts.

b.       actual rates for cost allocation because actual rates are easier to justify to users.

c.       budgeted rates for cost allocation because the rates are known in advance.

d.       budgeted rates for cost allocation because any variances are transferred to users.

 

The following data apply to questions 3–5.

Billy Stone, Inc., budgets the following amounts for its Buildings & Grounds and Computer Services Departments in servicing each other and the two manufacturing divisions of Signs and Mailers:

 

                                                                                    Used By                                              

Supplied By                  Building & Grounds      Computer Services       Signs                Mailers

 

Buildings & Grounds                    —                              0.20                  0.60                  0.20

Computer Services                    0.15                                —                  0.30                  0.55

 

The actual results for the time period were as follows:

                                                                                    Used By                                              

Supplied By          Building & Grounds       Computer Services        Signs          Mailers

 

Buildings & Grounds                  —                                0.10                  0.60                  0.30

Computer Services                    0.25                                —                  0.35                  0.40

 

Actual cost data for each department are:

                                                                                    Fixed                            Variable

                        Buildings & Grounds                              $  50,000                       $90,000

                        Computer Services                                $100,000                       $21,000

 

3.       Total fixed costs allocated from Buildings & Grounds to the Signs Department, using the preferred allocation basis, by the direct allocation method are

 

a.   $37,500.                        b.   $33,333.                              c.   $30,000.                  d.   $25,000.

 

4.       Total variable costs allocated from Computer Services to Mailers Department, using the preferred allocation basis, by the step-down allocation method (begin with Building & Grounds) are

 

a.   $8,400.                          b.   $12,000.                              c.   $16,000.                  d.   $25,235.

 

5.       The equation to determine the total variable costs of Computer Services using the preferred allocation basis, for the reciprocal allocation method is

 

a.       CS = $21,000 + 0.25 B&G.                                c.   CS = $21,000 + 0.15 B&G.

b.       CS = $21,000 + 0.20 B&G.                                d.   CS = $21,000 + 0.10 B&G.

                                                     

6.       If a cost is incurred for more than one user, that cost is considered a(n)

 

a.       homogeneous cost.

b.       common cost.

c.       stand-alone cost.

d.       incremental cost.

 

7.       Which of the following is often the most basic cause of contract disputes?

 

a.       allowable costs

b.       cost-allocation issues

c.       use of common costs

d.       writing into the contract “rules of the game”


8.      Bundling of products creates the need for revenue allocation for each of the following except when


a.       selling prices for the bundle are set to recoup the stand-alone prices of each product in the bundle.

b.      the manager is responsible for profitability on a product-by-product basis.

c.       the manager’s bonus is based upon product profitability.

d.      persons involved with product development are compensated by percentage of revenues realized.


Use the following information for questions 9 and 10.

Trio Company sells three products, Do, Ra, and Mi, for prices of $8, $7, and $5, respectively.  They also offer combinations of the products for reduced overall prices.  The following packages are available: (1) a package containing Do and Ra sells for $13.50, (2) a package of Do and Mi sells for $11.50, (3) a package containing Ra and Mi sells for $10.50, and (4) a package of all three products, Do, Ra, and Mi, sells for $17.00.


9.      If Trio Company uses the stand-alone method (based on selling prices) to allocate revenues to products, the amount of revenues to be allocated to Do from a package of all three products, as described in (4) above, sold would be


a.   $8.00.              b.   $6.80.                    c.   $5.95.                    d.   $4.25.


10.  If Trio Company uses the incremental-revenues allocation method and has designated Ra as the primary product, the amount of revenues from a bundled package of all three products to be allocated to Ra would be


a.   $7.00.              b.   $6.80.                    c.   $5,95.                    d.   $4.25.


 

WRITING/DISCUSSION EXERCISES


1.       Differentiate the single-rate from the dual-rate cost-allocation method

 

Is the caution to “beware of unit costs” applicable to the single-rate cost-allocation method?  Why or why not?  

 

2.       Understand how the uncertainty managers face are affected by the choice between budgeted and actual cost-allocation rates 

 

What has the manager of a supplier department to lose when s/he is not directly affecting the product or service?   

 

3.       Allocate support department costs using the direct, step-down, and reciprocal methods

 

              Why is it so important that managers have some understanding of cost accounting?

 

 

4.       Allocate common costs using either the stand-alone or incremental method

 

Give an example of a situation in which two or more users share a common cost and offer a way for the users to share the cost

 

 

5.       Explain the importance of explicit agreement between contracting parties when reimbursement is based on costs incurred

 

How does the phrase “hindsight has 20/20 vision” apply to contract disputes having to do with cost allocation?  

 

 

6.      Understand how bundling of products gives rise to revenue-allocation issues


Revenue assignment to a revenue object involves both revenue tracing and revenue allocation.  Revenue tracing occurs where revenues can be identified with an individual product, service, or customer in an economically feasible way.  What is done with deductions in revenue, such as sales returns, when revenues are traced to revenue objects?  


7.       Allocate the revenues of a bundled package to the individual products in that package


How does the illustration in the text [“Other Revenue-Allocation Methods”] of the president of a software company determining the revenue allocation weights for use with incremental method of allocating revenues reinforce the key guideline for management accounting that management is primarily a human activity?   

 


FILE: MS WORD

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