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Regarding service department allocations, user departments can be ______ departments.
Select all that apply
 
other service
marketing
production
   
Select all that apply
Methods to allocate service department costs are the ______ methods.
 
step
direct
reciprocal
   
The cost allocation method that charges service costs to user departments without making allocations between
service departments is called the _____ method.
 
direct
   
Baker, Inc. allocates IT costs on the basis of computer hours. Total costs incurred were $300,000.
A total of 100,000 hours were used as follows:
 
Administration used        50,000
Department A used         15,000
Department B used         35,000.
 
Using the direct method, the total IT costs allocated to Department B is ______.
 
$210,000
 
35,000 / 50,000 = 70%
$300,000 x 0.70 = $210,000
   
Administration costs of $500,000 are incurred by Baker, Inc. The company has a total of 1,500 employees.
Of those employees, 500 work for Information Technology, 400 work for Department A and 600 work for
Department B. Using the direct method, the total administration costs allocated to Department B is $_____ .
 
300,000
   
Select all that apply
Examples of service departments include ______.
 
human resources
information systems
   
The method that allocates some service department costs to other service departments is called the _____ _____.
 
step method
   
Methods to allocate service department costs are the ______, ______, ______ and methods.
 
direct, step, and reciprocal methods
   
Baker, Inc. has two service departments
Information Technology (IT) and Administration - and two user departments - Department A and Department B.
Administration uses 50% of the total services provided by IT and IT uses 33.3% of the total services provided by Administration.
If Baker, Inc. allocates service costs using the step method, ______.
 
information technology will likely go first and allocate some costs to administration
   
Direct cost of service departments become ______ costs to user departments.
overhead
   
All services provided by any service department including services provided to other service departments are recognized
when using the _____ _____.
 
reciprocal method
   
Baker, Inc. allocates IT costs on the basis of computer hours.
Total costs incurred were $300,000. A total of 100,000 hours were used as follows:
Administration used 50,000, Department A used 15,000, and Department B used 35,000.
Using the direct method, the total IT costs allocated to Department A is _____.
 
90,000
   
The reciprocal method is also known as the _____ _____ method because of how it solves equations.
 
simultaneous solution
   
Administration costs of $500,000 are incurred by Baker, Inc. The company has a total of 1,500 employees.
Of those employees, 500 work for Information Technology, 400 work for Department A and 600 work for
Department B. Using the direct method, the total administration costs allocated to Department A is ______.
 
$200,000
 
400 / 1,000 = 40%)
500,000 x .40 = 200,000.
   
Starting with allocations from the service department that provides the largest proportion of services to user departments
minimizes the service costs ignored in the allocation process of the step method.
 
False
   
Under the step method, once a service department's costs have been allocated to other departments,
______ costs can be allocated back to that service department.
 
no
   
Total Service Department Costs = Direct Costs of the Service Department + Cost Allocated to the Service Department
is the formula for the ______ method.
 
reciprocal
   
Select all that apply
The costs of running service departments may be understated when using
the ______ method to allocate service costs.
 
step
direct
   
The reciprocal method uses _____ algebra to solve the system of equations simultaneously.
 
matrix
   
Select all that apply
Which of the following statements are correct?
 
All three methods of cost allocation are still in use today.
Cost allocation is somewhat arbitrary, regardless of the method chosen.
   
The costs of running service departments may be understated when using either the _____ or _____ method
to allocate service costs.
 
direct, step
   
In an outsourcing decision where there are reciprocal services, it is always best to use the step method of allocation to
determine the costs that can be avoided by outsourcing.
 
False
   
If a production department stops using the services of a service department, the costs saved equals the costs allocated to it
using any of the service allocation methods.
 
False
   
When service departments use the services of other service departments, eliminating or outsourcing one of the departments
will _____ the resource demands placed on the other service departments.
 
reduce
   
The outputs from a common input and common production process are called _____ _____.
 
joint products
   
Joint costs are incurred ______ the split-off point.
 
prior to
   
Select all that apply
Joint costs are allocated to determine ______
 
costs for evaluating executive performance
the inventory value of products
   
Select all that apply
When there are no reciprocal services among the service departments, the cost savings from eliminating a department
should consist of ______.
 
avoidable fixed costs
variable costs
   
Select all that apply
Major methods for allocating joint costs are ______ method.
 
physical quantities
net realizable value
   
A manager can identify which variable and fixed costs can be eliminated if a service department is outsourced
using the ______ method.
 
reciprocal
   
The cost of a manufacturing process with two or more outputs is calleda(n) _____ _____.
 
joint cost
   
The estimated net realizable value method is sometimes referred to as the ______ or ______ method
 
netback or workback
   
Processing costs incurred prior to the _____-_____ _____ are the joint costs.
 
split-off point
 
The net realizable value is also called the _____ _____ at split-off.
sales value
   
When companies are subjected to regulations, the allocation of _____ _____can be a significant factor in determining the regulated rates.
 
Joint, costs
   
A company has $300,000 of joint costs for product A and product B. Product A's net realizable value = $400,000 and Product B's net
realizable value = $600,000. The amount of joint cost allocated to product B is $_____
 
180,000
   
The two major methods for allocating joint costs are the net _____ _____ method and the _____ _____ method.
 
realization value, physical quantities
   
Using the net realizable value, the _____ _____ as a percentage of sales is assumed to be equal for all products.
 
gross margin
   
Joint costs allocated based on the proportional values of the joint products at the split-off points is called the ______ method.
 
net realizable value
   
The difference between "net realizable value" and "estimated net realizable value" is whether or not the product can be
sold at the split-off point.
 
True
   
When no sales values exist for the outputs at the split-off point, the _____ _____ _____ value should be determined by
taking the sales value of each product at the first point at which it can be marketed.
 
estimated net realizable
   
Given: Product A's net realizable value = $400,000 Product B's net realizable value = $600,000 The company has $300,000 of joint costs for
product A and product B. The amount to be allocated to Department A is ______.
 
$120,000
 
$400,000 / $1,000,000 x $300,000
   
When joint costs are allocated based on measurement of the volume or weight of the joint products at the split-off point,
the _____ _____ method is being used.
 
Physical, quantities
   
When using the net realizable value method it is assumed that the gross margin as a percentage of sales is ______.
 
the same for all products
   
A company produces two products; A and B. The relative market values at the split-off point are not available.
For every $300,000 of joint costs, product A produces 10,000 pounds and product B produces 40,000 pounds.
The amount of joint costs allocated to product A is $______.
 
60000
   
If allocated _____ costs are used for decision-making purposes, there should be full recognition of their limitations.
 
joint
   
A company currently sells $800,000 of unassembled furniture, model A and model B.
It is considering whether to sell model B assembled. Given the following,
how much joint costs should be allocated to assembled model B?
Sales value of unassembled Model B = $400,000 Sales value of assembled Model B = $500,000
Additional cost to assemble Model B = $100,000 Joint costs = $240,000
 
120,000
 
($400,000 / $800,000) x $240,000
   
Select all that apply
The physical quantities method is used when ______.
 
output product prices are highly volatile
significant processing occurs between the split-off point and the first
point of marketability
   
In deciding whether to sell goods now or process them further,
the costs incurred to get the goods to this point ______ relevant to the decision.
 
are never
   
A company produces two products; A and B. The relative market values at the split-off point are not available.
For every $300,000 of joint costs, product A produces 10,000 pounds and product B produces 40,000 pounds.
The amount of joint costs allocated to product B is $_____
 
240,000
   
A company can sell a product for $150,000 at the split-off point or process it further to make a new product that sells for $200,000.
The joint costs incurred prior to the split off point were $100,000 and the additional processing costs to produce the new product
are $60,000. The difference in net income if the company decides to process further is ______.
 
10,000
 
$200,000 - $150,000 - $60,000
   
Select all that apply
Which of the following statements are correct?
 
No one allocation method is appropriate for all situations.
It is impossible to separate joint costs attributable to products on a
cause-and-effect basis.
   
The outputs from joint production process that are relatively minor in quantity and/or value when compared
to the main outputs are called
_____-_____.
 
by-products
   
Joint costs are allocated based on the proportional values of the joint products at the split-off point when
using the _____ _____ _____ method
 
net realizable value
   
Select all that apply
When it comes to accounting for by-products it is acceptable to ______.
 
treat the proceeds from sale of the by-products as other revenue
deduct the net realizable value from the joint costs
   
Select all that apply
When considering a sell or process further decision, management must consider ______.
 
additional cost of processing further
additional revenue after processing further
   
A company is deciding whether or not to sell or process a product.
The allocation method chosen to allocate joint costs incurred up to this point ______.
 
are not relevant to the decision.
   
Select all that apply
Accounting for by-products attempts to ______.
 
reflect the economic relationship between the by-products and the main products.
minimize recordkeeping for inventory valuation purposes.
 
Which methods can be used to allocate service department costs to other departments? (Check all that apply.)
 
Direct
Step-down
Reciprocal
   
Process costing assigns costs to units by each ________ that they pass through. (Enter only one word per blank.)
 
Department
   
When using the FIFO method, both beginning and ending inventories are converted to a(n) _________ units basis.
 
equivalent
   
What costing system is most likely to be used when raw materials are converted into homogeneous products?
 
Process
   
Which of the following statements are true? (Check all that apply.)
 
Process costing should be used when a single product is produced on a continuous basis.
Process costing accumulates costs by department, whereas job-order costing accumulates costs by job.
   
Organize the following accounts in the order in which costs flow from one to the other in a process costing system.
 
Raw materials
Work in process
Finished goods
Cost of goods sold
   
What are conversion costs?
 
Direct labor plus manufacturing overhead cost
   
The journal entry to record material cost in the first department would include a ________ to Work in Process-Department #1.
 
Debit
 

What are the different ways to compute the equivalent units of production? (Check all that apply.)
Weighted-average method
FIFO method
   
The correct journal entry to record labor cost in the first department would be to ________ Wages payable and _________ Work in process-Department #1.
 
Credit; Debit
   
What is the journal entry to record the transfer of completed units to the finished goods warehouse?
 
Debit Finished goods and credit Work in process.
   
What are equivalent units of production under the weighted-average method?
 
Equivalent units in ending work in process plus units transferred out
   
When using process costing each processing department has a separate ______  ______  _______account.
 
work in process
   
______________  completed units are translated into an equivalent number of fully completed units when determining a department's output.
(Enter only one word per blank.)
 
Partially
   
What is the journal entry to record the transfer of partially completed products from processing Department #1 to processing Department #2?
 
Debit Work in process-Department #2 and credit Work in process-Department #1.
   
The correct journal entry to apply manufacturing costs to processing Department #1 would be to ____________ Manufacturing overhead
and __________  Work in process-Department #1.
 
Credit; debit
   
Using the weighted-average method, what is the total equivalent units of production if there are 150 units transferred to finished goods
and 215 units that are 60% complete in ending work in process inventory?
 
279
 

Using the FIFO method, what is the cost per equivalent unit if cost added in a period is $6 , 000 and there are 75 equivalent units of production?
 
$80
   
To record the sale of goods, there should be a _______________ to Finished Goods and a ____________ to Cost of Goods Sold.
 
Credit; debit
 

In what ways is FIFO different from the weighted-average method in process costing? (Check all that apply.)
 
Computation of equivalent units
The way in which costs of beginning inventory are treated
   
There are ________ equivalent units in work in process when work in process contains 500 units that are 34% completed.
(Enter your answer as a whole number - i.e. 87.)
 
170
   
To calculate cost per equivalent unit using the weighted-average method, add the cost of __ _ work in process inventory and costs
added during the period and divide by equivalent units of production.
 
beginning
   
Which of the following are similarities between job-order costing and process costing? (Check all that apply).
 
The same basic manufacturing accounts are used for both costing systems.
The purpose is to assign raw materials, labor and manufacturing overhead to products.
The flow of costs through the manufacturing accounts is basically the same for both costing systems.
   
Which of the following are examples of a service department? (Check all that apply.)
 
Human resources
Internal auditing
Cafeteria
   
The step-down method begins allocating cost with the department that provides the ______________ amount of service to other service departments.
 
greatest
   
The ____________ method of allocating service department costs ignores services provided by one service department to other service departments.
 
direct
   
What type of products are best produced in job-order costing?
 
Many different products with unique production requirements
   
If cost per equivalent unit is $10 for materials and $20 for conversion, and 300 units have been completed, what is the cost assigned to these units?
 
$9,000
   
Both process costing and job-order costing assign which of the following costs to products? (Check all that apply.)
 
Materials
Labor
Manufacturing overhead
   
Which of the following statements are true? (Check all that apply.)
 
In both process and job-order costing, predetermined overhead rates are usually used for manufacturing overhead.
Journal entries to record materials into production are similar in job-order and process costing.
   
The central purposes of an organization are carried out in the _________ department.
 
Operating
   
The weighted-average method includes costs for:
 
prior and current periods
   
The _________________  method combines units and costs from both prior and current periods, while the _____________ method
includes equivalent units and unit costs for work done during the current period.
 
weighted-average; FIFO
 
   
Which of the following are characteristics of operation costing? (Check all that apply.)
 
Products are processed in batches.
Costs are accumulated by department
   
The __________ method allocates service departments costs to each other forward and backward, while
The __________ method only allocates service department costs to each other forward.
 
reciprocal, step-down
   
A(n) _________ department is where work is performed on products, and materials, labor, and overhead costs are added to products.
(Enter only one word per blank.)
 
Processing
   
Which methods ignore the amount of the allocation base attributable to the service department whose cost is being allocated? (Check all that apply.)
 
Direct method
Step-down method
   
Once production is completed in the processing departments, to what account are the production costs transferred?
 
Finished goods
   
Services provided between service departments are known as ___________ services.
 
Interdepartmental
   
Which of the following is included in computing equivalent units under the FIFO method, but not under the weighted-average method?
 
Equivalent units to complete beginning work in process
   
In a processing department, all units of output are ____________.
 
homogeneous.
   
Which method calculates cost per equivalent unit using only costs incurred by the processing department in the current period?
 
FIFO
   
Which of the following can be added in any processing department when using process costing?
 
Materials, labor and overhead
   
What is the equivalent units of production using the FIFO method if 800 units were transferred out, ending work in process contained
400 equivalent units, and beginning work in process inventory contained 500 equivalent units?
 
700
   
The __________ method gives recognition to the interdepartmental services.
 
reciprocal
   
_________________ costing and ________________ costing are the two most commonly used methods for determining unit product costs.
 
Job – Order; process
   
When computing the equivalent units of production under the weighted-average method, partially completed inventory is ignored.
 
beginning work in process
   
One of the components of transferred out units using FIFO is the cost of units ______________ and completed during the period.
 
begun
   
When comparing the FIFO method of computing equivalent units to the weighted-average method:
 
The weighted-average method blends together work and costs from prior periods with the current period whereas FIFO separates the two periods
   
Costs _____________ in are treated as another category of cost, just like materials or conversion costs.
 
transferred
   
The activity in the processing department is performed _____________ on all of the units passing through it. (Enter only one word per blank.)
 
uniformly
   
From a cost control perspective, which method would be the best option for process costing?
 
FIFO
   
In the weighted-average method, costs to be accounted for include ______________ work in process inventory,
while costs accounted for include __________ work in process inventory. (Enter only one word per blank.)
 
Beginning; ending
   
True or false: A cost reconciliation report using the weighted-average method reports the same information as a cost reconciliation report using FIFO.
 
True

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