Questions:
1) The use of budgeted service department cost rates protects using departments from _____.
A. all of these answers are correct
B. service outages
C. price fluctuations
D. service department efficiencies
2) Cost allocation base refers to the _____.
A. cost objectives
B. total allocated costs
C. total costs to be allocated
D. cost driver
3) Murphy Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Mixing is _____.
A. $78,000
B. $63,000
C. $58,500
D. $31,500
4) Kevin Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Finishing is _____.
A. $105,000
B. $31,500
C. $72,000
D. $42,000