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KET201 Accounting Allocating Equipment Đại học Hà Nội

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KET201 Accounting Allocating Equipment Đại học Hà Nội

Chapter 13
Question Nos. 10, 11-14, and 26 are AICPA adapted.
Question Nos. 15-28 and 23-25 are CIA adapted.
C 1. A department that would be classified as a producing department is:
A. Production Control
B. Utilities
C. Finishing
D. Medical
E. Shipping
B 2. A department that would be classified as a service department is:
A. Refining
B. Receiving
C. Mixing
D. Assembly
E. Finishing
A 3. In determining the right method for allocating equipment depreciation to
departments, the best recommendation is to:
A. use the cost of equipment in the department as a basis for allocation
B. allocate on the basis of square footage used in a given department
C. charge the amounts to General Plant
D. use algebraic techniques
E. allocate on the basis of companywide rates
A 4. The most reasonable basis for allocating worker’s compensation insurance is:
A. departmental payroll
B. building depreciation
C. kilowatt-hours
D. number of employees
E. materials used
E 5. A company is attempting to allocate the costs of electricity in various
departments. The variable portion of electricity expense is to be allocated using
kilowatt-hours. The information needed in order to allocate the fixed portion of
the current period’s electricity expense is:
A. rated horsepower of equipment
B. number of machines in each department
C. estimated materials consumption
D. number of employees
E. square footage in each department
Factory Overhead: Departmentalization 173
E 6. The method for allocating service department costs that requires the least
clerical work is:
A. use of square footage in each department
B. step method
C. allocation to other service departments only
D. simultaneous method
E. direct method
E 7. Rapid Falls Corp. has three producing departments, A, B, and C, with 50, 30, and
20 employees, respectively, in each department. Factory payroll costs other
than direct labor are accumulated in a Payroll Department account and are
assigned to producing departments on the basis of number of employees. The
total payroll in each department was: A, $300,000; B, $275,000; C, $325,000;
and Payroll, $50,000. Other costs accumulated in the Payroll Department
amounted to $200,000. The amount of Payroll Department costs chargeable to
Department C is:
A. $125,000
B. $100,000
C. $40,000
D. $10,000
E. $50,000
E 8. The following statement that best describes cost allocation is:
A. a company, as a general rule, should allocate indirect costs randomly or
based on an “ability-to-bear” criterion
B. a company can affect total income the most strongly by using the algebraic
method of allocating indirect costs
C. a company can maximize or minimize total company income by selecting
different bases on which to allocate indirect costs
D. a company should select an allocation base to raise or lower reported
income on given products
E. a company’s total income will remain unchanged no matter how indirect
costs are allocated
= $2,500/employee _ 20 = $50,000
50 + 30 + 20
$50,000 + $200,000
174 Chapter 13
D 9. Carmichael Manufacturing Company has two production departments
(Fabrication and Assembly) and three service departments (General Factory
Administration, Factory Maintenance, and Factory Cafeteria). A summary of the
year’s costs and other data for each department prior to allocation of service
department costs appears below.
General Factory )
Fabrication Assembly Administration )
Labor costs…………………………… $1,950,000 $2,050,000 $90,000 )
Material costs……………………….. $3,130,000 $ 950,000 — )
Overhead…………………………….. $1,650,000 $1,850,000 $70,000 )
Direct labor hours…………………. 562,500 437,500 31,000 )
Number of employees……………. 280 200 12 )
Square footage occupied……….. 88,000 72,000 1,750 )
( Factory Factory
( Maintenance Cafeteria
( $82,100 $87,000
( $65,000 $91,000
( $56,100 $62,000
( 27,000 42,000
( 8 20
( 2,000 4,800
The costs of the General Factory Administration Department, Factory
Maintenance Department, and Factory Cafeteria are allocated on the basis of
direct labor hours, square footage occupied, and number of employees,
respectively. There are no manufacturing overhead variances.
Assuming that Carmichael elects to distribute service department costs
under the direct method of cost allocation, the amount of Factory Maintenance
Department costs that would be allocated to the Fabrication Department is
(round all final calculations to the nearest dollar):
A. $106,091
B. $91,440
C. $0
D. $111,760
E. none of the above


KET201 Accounting Allocating Equipment Đại học Hà Nội

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