Reference no: EM132510370

Using the sequential method, Thomas Company allocates Maintenance Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate Maintenance costs before Cafeteria costs.

The company has the following information about its two service departments and two production departments, Cutting and Assembly:

                                          Square Feet       Number of Employees

Maintenance Department             500                    20

Cafeteria Department                 1,500                  10

Cutting Department                      1,500                  60

Assembly Department                     7,000                    20

Question1 : What is the percentage (proportional) usage of the Maintenance Department by the Cutting Department?

a.14.2%

b.66.7%

c.17.6%

d.15%

Question2 : Which of the following is the correct rationale behind allocating support department costs to products?

a.Support department services may be used more heavily by some products than others, and recording them as facility-level costs can result in inaccurate product costs.

b.Support department services are rarely used more heavily by some products than others, and it is best to record them at the facility level for more accurate product costing.

c.Support department costs are impossible to trace to the facility, so they must be traced to the department.

d.The Institute of Management Accountants (IMA) requires the allocation of support department costs to products.

Question3 : What is a common feature of all three methods (direct, sequential, and reciprocal services) of allocating support department costs to production departments?

a.All three are equally expensive to utilize.

b.All three are equally complicated to administer.

c.All three follow the same six-step process.

d.All three overlook certain types of overhead costs.

Question4 : Which of the following statements about the allocation of support department services is true?

a.Support department services can be allocated to only one product.

b.Support department services can be allocated to only one department.

c.Support department services can be allocated using one of three different methods.

d.Support department services can be allocated using only one rate.

Question5 : When multiple production department rates are used to apply overhead to products, overhead costs are

a.first directly traced or distributed to the products using multiple rates.

b.first directly traced or distributed to support and production departments and then allocated to production departments based on support activity used by each production department.

c.expensed as period costs and direct labor and direct materials are traced to the products using multiple production department rates.

d.combined with all other support department costs using a single rate and then allocated to products with multiple rates