Ch15 - CHAPTER 15 ALLOCATION OF SUPPORT DEPARTMENT COSTS,...

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.
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.
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.
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.
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

5. When budgeted cost-allocation rates are used, user-division managers face
uncertainty about the allocation rates for that budget period.
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.
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.
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.
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.