cost12etif_15 - CHAPTER 15 ALLOCATION OF SUPPORT DEPARTMENT...

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CHAPTER 15 ALLOCATION OF SUPPORT DEPARTMENT COSTS, COMMON COSTS, AND REVENUES TRUE/FALSE 1. The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : dual-rate cost-allocation method The dual cost-allocation method classifies costs into two pools, a variable cost pool and a fixed cost pool. 2. Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility. Answer : True Difficulty : 3 Objective : 1 Terms to Learn : single-rate cost-allocation method 3. The single-rate cost-allocation method provides better information for decision making than the dual-rate method. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : single-rate cost-allocation method, dual-rate cost-allocation method The dual-rate cost-allocation method provides better information for decision making than the single-rate method. 4. An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : single-rate method The single-rate method is the easiest cost allocation method, but it is the least accurate cost-allocation choice. 15-1
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5. When budgeted cost-allocation rates are used, user-division managers face uncertainty about the allocation rates for that budget period. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : single-rate cost-allocation method, dual-rate cost-allocation method When budgeted cost-allocation rates are used, user-division managers face no uncertainty about the allocation rates for that budget period. 6. When budgeted cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : single-rate cost-allocation method, dual-rate cost-allocation method 7. When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : single-rate cost-allocation method, dual-rate cost-allocation method When actual cost-allocations rates are used, variations in actual usage by one division affect the costs allocated to other divisions. 8. The only choices that a firm has for support department cost allocation rates are to use either a budgeted rate or an actual rate. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : single-rate method, dual-rate method The choices a firm has for support department cost allocation rates include using a budgeted rate, an actual rate, or some negotiated rate. 9. The direct allocation method highlights recognition of services rendered by support departments to other support departments.
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