Chapter18.Allocation of Support Activity Costs and Joint Costs

Chapter18.Allocation of Support Activity Costs and Joint Costs

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Chapter 18: Allocation of Support Activity Costs and Joint Costs MULTIPLE CHOICE QUESTIONS 1. Which of the following would be considered a service department for an airline? A. Maintenance. B. Information Systems. C. Purchasing. D. Flight Catering. E. All of the above. Answer: E LO: 1 Type: N 2. Which of the following would not be considered a service department in a hospital? A. Security. B. Cardiac Care. C. Patient Records. D. Accounting. E. Human Resources. Answer: B LO: 1 Type: RC 3. Consider the following statements about service department costs: I.The costs of the Human Resources Department in a manufacturing organization must be allocated to production departments in order to achieve a correct costing of inventory. II.The allocation of service department costs requires that an organization select both an allocation base and an allocation method. III.Service department cost allocations are more relevant for firms involved in service industries (e.g., repair, health care) than for those involved with manufacturing. Which of the above statements is (are) correct? A. I only. B. II only. C. I and II. D. II and III. E. I, II, and III. Answer: C LO: 1 Type: RC, N 4. Which of the following methods ignores the fact that some service departments provide service to other service departments? A. Direct method. B. Indirect method. C. Step-down method. D. Reciprocal method. E. Dual-cost allocation method. Answer: A LO: 1 Type: RC 44 Hilton, Managerial Accounting, Sixth Edition
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5. Consider the following statements about the direct method of service department cost allocation: I.Under the direct method, all service department costs are eventually allocated to production departments. II.The order in which service department costs are allocated to production departments is important. III.Once a service department's costs have been allocated, no costs are re-circulated back to that department. Which of the above statements is (are) correct? A. I only. B. II only. C. I and II. D. I and III. E. I, II, and III. Answer: D LO: 1 Type: RC 6. The Milrose Clinic has two service departments (Human Resources and Information Resources) and two "production" departments (In-patient Treatment and Out-patient Treatment). The service departments service each other, and studies have shown that Information Resources provides the greater amount of service. Which of the following allocations would occur if Milrose uses the direct method of cost allocation? A. Information Resources cost would be allocated to In-patient Treatment. B. Information Resources cost would be allocated to Human Resources. C. Human Resources cost would be allocated to Information Resources. D. In-patient Treatment cost would be allocated to Out-patient Treatment. E.
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Chapter18.Allocation of Support Activity Costs and Joint Costs

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