Chap 9

1. Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of
individual products, the controller estimates the amount of overhead that should be allocated to the
individual product lines from the information provided below. (CMA adapted)
Wall MirrorsSpecialty Windows
Units produced 40 20
Material moves per product line 5 15
Direct labor-hours per product line 200 300
Budgeted material handling costs: $50,000
Under an activity-based costing (ABC) system, the materials handling costs allocated to one unit of
Specialty Windows would be:
A. $1,875.00.
B. $937.50.
C. $312.50.
D. $1,500.00.
2. Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of
individual products, the controller estimates the amount of overhead that should be allocated to the
individual product lines from the information provided below. (CMA adapted)
Wall Specialty
Mirrors Windows
Units produced 40 20
Material moves per product line 5 15
Direct labor-hours per product
200 300
line
Budgeted material handling costs: $50,000
Under a traditional costing system that allocates overhead on the basis of direct labor-hours, the
materials handling costs allocated to one unit of Specialty Windows would be:
A. $1,500.
B. $500.
C. $2,000.
D. $5,000.
3. Miracle Consulting Corporation has its headquarters in Chicago and operates from three branch
offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service
and Research Service. These costs are allocated to the three branch offices using an activity-based
costing system. Information for next year follows:
Activity Cost PoolActivity Measure Estimated Cost
General service % of time devoted to branch $ 700,000
Research service Computer time $ 140,000
Estimated branch data for next year is as follows:
% of time Computer time
Portland 30% 200,000 minutes
Dallas 60% 150,000 minutes
Miami 10% 50,000 minutes
How much of the headquarters cost allocation should the Dallas office expect to receive next year?
A. $280,000
B. $409,500
C. $472,500
D. $504,000
4. Cassidy Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on direct labor-
hours (DLHs). The company has two products, VIP and Kommander, about which it has provided
the following data:
VIP Kommander
Direct materials per unit $ 27.50 $ 62.10
Direct labor per unit $ 15.60 $ 52.00
Direct labor-hours per unit 0.60 2.00
Annual production 40,000 15,000
The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's
estimated total direct labor-hours for the year is 54,000. The company is considering using a variation
of activity-based costing to determine its unit product costs for external reports. Data for this proposed
activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (DLHs) $ 918,000
Preparing batches (batches) 397,440
Product support (product variations) 1,134,000
Total $ 2,449,440
Expected Activity
VIP Kommander Total
24,00
DLHs 30,000 54,000
0
Batches 1,458 1,026 2,484
Product variations 2,592 1,188 3,780
Unit overhead cost of Product Kommander under the activity-based costing system is closest to:
A. $204.82.
B. $68.70.
C. $182.80.
D. $114.10.
5. Markham Company makes two products: Basic Product and Deluxe Product. Annual production
and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product. The company has
traditionally used direct labor-hours as the basis for applying all manufacturing overhead to
products. Basic Product requires 0.3 direct labor-hours per unit and Deluxe Product requires 0.6
direct labor-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing
unit product costs for external reports. The new activity-based costing system would have three
overhead activity cost pools (Activity 1, Activity 2, and General Factory) with estimated overhead costs
and expected activity as follows:
Estimated Expected Activity
Basic
Activity Cost Pool Overhead Costs Product Deluxe Product Total
Activity 1 $ 30,528 1,000 600 1,600
Activity 2 17,385 1,700 200 1,900
General Factory 50,872 510 660 1,170
Total $ 98,785
(Note: The General Factory costs are allocated on the basis of direct labor-hours.)
The overhead cost per unit of Deluxe Product under the activity-based costing system is closest to:
A. $50.66.
B. $26.09.
 C. $35.28.
D. $38.16.
6. The Mega Construction Company recently switched to activity-based costing (ABC) from the
department allocation method. The department method allocated overhead costs at a rate of $60
per machine hour. The cost accountant for the Finishing Department has gathered the following
data:
Activity Cost Drivers Rate
Material handlingTons of material handled $ 80
Machine setups Number of production runs 3,750
Utilities Machine-hours 25
Quality control Number of inspections 500
During April, Mega purchased and used $100,000 of direct materials at $20 per ton. There were 8
production runs using a total of 12,000 machine-hours in April. The manager of the Finishing
Department needed 12 inspections. Actual overhead costs totaled $820,000 for the month.
How much overhead costs were applied to the Work-in-Process Inventory during April using
traditional costing?
A. $536,000
B. $720,000
C. $736,000
D. $820,000
7. Allure Company manufactures and distributes two products, M and XY. Overhead costs are
currently allocated using the number of units produced as the allocation base. The controller has
recommended changing to an activity-based costing (ABC) system. She has collected the following
information:
Activity Cost Driver Amount M XY
Production setups Number of setups $ 72,000 12 28
Material handling Number of parts 50,000 54 36
Packaging costs Number of units 355,000 108,000 72,000
$
477,000
What is the total overhead per unit allocated to Product XY using activity-based costing (ABC)?
Note: Do not round intermediate calculations; round your final answer to the nearest cent.
A. $1.69
B. $2.95
C. $2.65
D. $2.45
8. Allure Company manufactures and distributes two products, M and XY. Overhead costs are
currently allocated using the number of units produced as the allocation base. The controller has
recommended changing to an activity-based costing (ABC) system. She has collected the following
information:
Activity Cost Driver Amount M XY
Production setups Number of setups $ 73,000 12 28
Material handling Number of parts 42,000 72 18
Packaging costs Number of units 153,750 75,000 50,000
$ 268,750
What is the total overhead allocated to Product XY using the current system?
A. $121,000
B. $107,500
C. $147,750
 D. $161,250

9. Donnati Corporation has provided the following data from its activity-based costing system:
Activity Cost PoolTotal Cost Total Activity
Assembly $ 383,180 23,000 machine-hours
Processing orders $ 50,798 1,100 orders
Inspection $ 106,110 1,620 inspection-hours

Data concerning one of the company's products, Product A43V, appear below:
Selling price per unit $ 124.60
Direct materials cost per unit $ 22.08
Direct labor cost per unit $ 45.77
Annual unit production and sales 210
Annual machine-hours 320
Annual orders 80
Annual inspection-hours 10
According to the activity-based costing system, the product margin for Product A43V is:
A. $2,891.90.
B. $5,931.30.
C. $11,917.50.
D. $2,236.90.
10. Pinnocle Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity
Assembly $ 1,114,920 57,000 machine-hours
Processing orders $ 47,016 1,800 orders
Inspection $ 107,328 1,560 inspection-hours
The company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40
orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its
direct labor cost is $12.34 per unit. The product sells for $129.90 per unit.
According to the activity-based costing system, the product margin for product S78N is:
A. $4,116.50.
B. $29,132.50.
C. $6,180.50.
D. $5,161.30.
11. Vanguard Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity
Assembly $ 942,480 66,000 machine-hours
Processing orders $ 85,050 1,800 orders
Inspection $ 126,854 1,820 inspection-hours
The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40
orders, and 10 inspection-hours per year. The product's direct materials cost is $35.72 per unit and its
direct labor cost is $29.46 per unit.
According to the activity-based costing system, the average cost of product O37W is closest to:
A. 94.11 per unit.
B. $89.72 per unit.
 C. $65.18 per unit.
D. $92.49 per unit.
12. Banc Corporation Trust is considering either a bank-wide overhead rate or department overhead
rates to allocate $396,000 of indirect costs. The bank-wide rate could be based on either direct
labor-hours (DLH) or the number of loans processed. The departmental rates would be based on
direct labor-hours for Consumer Loans and a dual rate based on direct labor-hours and the
number of loans processed for Commercial Loans. The following information was gathered for the
upcoming period:
Department DLH Loans ProcessedDirect Costs
Consumer 14,000 700 $ 280,000
Commercial 8,000 300 $ 180,000
What is the overhead rate if Banc Corporation Trust allocates the indirect costs using direct labor-
hours?
A. $18 per hour
B. $396 per loan
C. $460 per loan
D. $20.91 per hour
13. Banc Corporation Trust is considering either a bank-wide overhead rate or department overhead
rates to allocate $396,000 of indirect costs. The bank-wide rate could be based on either direct
labor-hours (DLH) or the number of loans processed. The departmental rates would be based on
direct labor-hours for Consumer Loans and a dual rate based on direct labor-hours and the
number of loans processed for Commercial Loans. The following information was gathered for the
upcoming period:
Department DLH Loans ProcessedDirect Costs
Consumer 14,000 700 $ 280,000
Commercial 8,000 300 $ 180,000
If Banc Corporation Trust uses a bank-wide rate based on the number of loans processed, what would
be the total costs for the Commercial Department?
A. $118,800
B. $180,000
C. $298,800
D. $318,000
14. Flawless Cosmetic Company manufactures and distributes several different products. The company
currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct
labor-hour. Loren is the department manager of the Makeup Department that produces Concealer
(C) and Glow Cream (GC). Jennifer is the department manager of the Hair Care Department that
manufactures Shampoo (S). The product costs (per case of 24 bottles) and other information are as
follows:
Products
C GC S
Direct materials $ 100.00 $ 72.00 $ 48.00
Direct labor 42.00 31.50 12.00
Overhead 28.00 21.00 14.00
$ 170.00 $ 124.50 $ 74.00
Machine-hours 4 2 3
Number of cases (per year) 300 500 600
If Flawless changes its allocation basis to machine-hours, what is the total product cost per case for
Product C?
Note: Do not round intermediate calculations.
A. $161.50
 B. $169.30
C. $182.44
D. $183.36
15. Miracle Consulting Corporation has its headquarters in Chicago and operates from three branch
offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service
and Research Service. These costs are allocated to the three branch offices using an activity-based
costing system. Information for next year follows:
Activity Cost Pool Activity Measure Estimated Cost
General service % of time devoted to branch $ 830,000
Research service Computer time $ 229,440
Estimated branch data for next year is as follows:
% of time Computer time
Portlan
30% 226,000 minutes
d
Dallas 60% 176,000 minutes
Miami 10% 76,000 minutes
How much of the headquarters cost allocation should the Dallas office expect to receive next year?
A. $345,000
B. $504,800
C. $582,480
D. $621,000
16. Cassidy Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on direct labor-
hours (DLHs). The company has two products, VIP and Kommander, about which it has provided
the following data:
VIP Kommander
Direct materials per unit $ 27.50 $ 62.10
Direct labor per unit $ 15.60 $ 52.00
Direct labor-hours per unit 0.60 2.00
Annual production 43,800 18,800
The company's estimated total manufacturing overhead for the year is $4,933,272 and the company's
estimated total direct labor-hours for the year is 63,880.
The company is considering using a variation of activity-based costing to determine its unit product
costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (DLHs) $ 2,628,000
Preparing batches (batches) 642,312
Product support (product variations) 1,662,960
Total $ 4,933,272
Expected Activity
VIP Kommander Total
26,28
DLHs 37,600 63,880
0
Batches 1,838 1,406 3,244
Product variations 3,162 1,758 4,920
Unit overhead cost of Product Kommander under the activity-based costing system is closest to:
A. $383.65.
B. $128.69.
C. $342.46.
 D. $213.77.
17. Upton Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on direct labor-
hours (DLHs). The company has two products, Long and Short, about which it has provided the
following data:
Long Short
Direct materials per unit $ 14.20 $ 48.30
Direct labor per unit $ 16.80 $ 50.40
Direct labor-hours per unit 0.80 2.40
Annual production 45,000 10,000
The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's
estimated total direct labor-hours for the year is 60,000.
The company is considering using a variation of activity-based costing to determine its unit product
costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity MeasuresEstimated Overhead Cost
Direct labor support (DLHs) $ 1,740,000
Setting up machines (setups) 422,400
Part administration (part types) 1,008,000
Total $ 3,170,400
Expected Activity
Long Short Total
24,00
DLHs 36,000 60,000
0
Setups 1,140 1,500 2,640
Part
900 2,460 3,360
types
Unit overhead cost of Product Short under the activity-based costing system is closest to:
A. $266.10.
B. $98.70.
C. $167.40.
D. $225.52.
18. Upton Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on direct labor-
hours (DLHs). The company has two products, Long and Short, about which it has provided the
following data:
Long Short
Direct materials per unit $ 15.00 $ 48.80
Direct labor per unit $ 17.60 $ 51.20
Direct labor-hours per unit 0.80 2.40
Annual production 40,000 20,000
The company's estimated total manufacturing overhead for the year is $4,547,200 and the company's
estimated total direct labor-hours for the year is 80,000.
The company is considering using a variation of activity-based costing to determine its unit product
costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Direct labor support (DLHs) $ 3,081,600
Setting up machines (setups) 441,600
 Activities and Activity Measures Estimated Overhead Cost
Part administration (part types) 1,024,000
Total $ 4,547,200
Expected Activity
Long Short Total
DLHs 32,000 48,000 80,000
Setups 1,220 1,900 3,120
Part types 980 2,860 3,840
The unit product cost of product Long under the company's traditional costing system is closest to:
A. $63.42.
B. $78.07.
C. $92.45.
D. $32.60.
19. Markham Company makes two products: Basic Product and Deluxe Product. Annual production
and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product. The company has
traditionally used direct labor-hours as the basis for applying all manufacturing overhead to
products. Basic Product requires 0.3 direct labor-hours per unit and Deluxe Product requires 0.6
direct labor-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing
unit product costs for external reports. The new activity-based costing system would have three
overhead activity cost pools (Activity 1, Activity 2, and General Factory) with estimated overhead costs
and expected activity as follows:
Estimated Expected Activity
Activity Cost Pool Overhead Costs Basic Product Deluxe Product Total
Activity 1 $ 30,528 1,000 600 1,600
Activity 2 17,385 1,700 200 1,900
General Factory 50,872 510 660 1,170
Total $ 98,785
(Note: The General Factory costs are allocated on the basis of direct labor-hours.)
The overhead cost per unit of Deluxe Product under the activity-based costing system is closest to:
A. $50.66.
B. $26.09.
C. $35.28.
D. $38.16.
20. Vanguard Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity
Assembly $ 951,720 66,000 machine-hours
Processing orders $ 99,960 2,100 orders
Inspection $ 149,248 2,120 inspection-hours
The company makes 460 units of product O37W a year, requiring a total of 710 machine-hours, 30
orders, and 15 inspection-hours per year. The product's direct materials cost is $36.28 per unit and its
direct labor cost is $29.74 per unit.
According to the activity-based costing system, the average cost of product O37W is closest to:
A. $93.68 per unit.
B. $90.57 per unit.
C. $66.02 per unit.
D. $91.38 per unit.

Chap 10
1. Tabor Detective Services is evaluating its system. The company gathered the information below:
Process Available Hours per WeekValue-Added Time (hours per client)Average Demand
Interview
70 2 20
s
Research 130 3 30
Pursuit 75 0.5 120
Travel 200 4 35
Practical capacity is 75% for each process.
Which process is most likely to be a current bottleneck?
A. Interviews
B. Research
C. Pursuit
D. Travel
2. Forensic Specialists compiled the following information for its first quarter cost of quality report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The relevant percentage to be used to express appraisal activities at Forensic Specialists is:
A. 5.7%.
B. 33.2%.
C. 2.75%.
D. 1.25%.
3. Forensic Specialists compiled the following information for its first quarter cost of quality report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The total cost of external failure activities at Forensic Specialists is:
A. $420,560.
B. $31,920. (Resolving customer complaints)
C. $117,600.
 D. $175,000.
4. Forensic Specialists compiled the following information for its first quarter cost of qualityreport:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The relevant percentage to be used to express internal failure activities at Forensic Specialists is:
A. 27.9%.
B. 4.77%.
C. 4.20%.
D. 15.02%.
5. Forensic Specialists compiled the following information for its first quarter cost of qualityreport:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The total cost of prevention activities for Forensic Specialists is:
A. $294,000.
B. $224,000.
C. $459,200.
D. $504,000.
6. Water Industries' quality control report for August contains the following items:
Gathering, analyzing, and reporting quality data $ 2,500
Inspecting raw materials received from vendors 3,500
Testing and inspecting finished products 4,500
Visiting customer sites to test product 5,500
Designing product to reduce production problems 6,500
Repairing and/or replacing products under warranty 6,150
Maintaining equipment used to gather production quality
8,500
data
Cost (net) of materials wasted during production 9,500
What would be the total of the nonconformance costs on the August quality control report for Water
Industries?
A. $31,000
B. $28,500
C. $15,650
D. $17,500
7. Water Industries' quality control report for August contains the following items:
Gathering, analyzing, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
 Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality
7,000
data
Cost (net) of materials wasted during production 8,000
What would be the total of the conformance costs on the August quality control report for Water
Industries?
A. $22,000
B. $20,000
C. $15,000
D. $13,000
8. Scallon Products reports the following information about resources. At the beginning of the year,
Scallon estimated it would spend $8,000 for energy and $12,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Energy $ 0.80 per MH11,350 MH
Repairs $ 24 per job 600 jobs
Resources supplied:
$
Energy
10,500
$
Repairs
18,000
The unused resource capacity for repairs for Scallon Products is:
A. $2,400.
B. $12,000.
C. $6,000.
D. $3,600.
9. Scallon Products reports the following information about resources. At the beginning of the year,
Scallon estimated it would spend $8,000 for energy and $12,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Energy $ 0.80 per MH11,350 MH
Repairs $ 24 per job 600 jobs
Resources supplied:
$
Energy
10,500
$
Repairs
18,000
The unused resource capacity for energy for Scallon Products is:
A. $8,000.
B. $1,080.
C. $1,420.
D. $2,500.
10. Denim Products reports the following information about resources. At the beginning of the year,
Denim estimated it would spend $84,000 for setups and $41,000 for quality testing.
Cost Driver
Rate Volume
Resources used:
 Cost Driver
Rate Volume
Setups $ 250 per run350 runs
Quality testing 40 per test900 tests
Resources supplied:
$
Setups
90,000
Quality testing 40,000
The unused resource capacity for quality testing for Denim Products is:
A. $4,000.
B. $2,000.
C. $1,000.
D. $5,000.
11. Denim Products reports the following information about resources. At the beginning of the year,
Denim estimated it would spend $84,000 for setups and $41,000 for quality testing.
Cost Driver
Rate Volume
Resources used:
Setups $ 250 per run350 runs
Quality testing $ 40 per test900 tests
Resources
supplied:
Setups $ 90,000
Quality testing $ 40,000
The unused resource capacity for setups for Denim Products is:
A. $6,000.
B. $2,500.
C. $1,000.
D. $3,500.
12. South Beach Industries reports the following information about resources. At the beginning of the
year, South Beach estimated it would spend $180,000 for materials, $42,000 for purchasing, $35,000
for setups, and $36,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Materials $ 10 per pound 18,350 pounds
Purchasing $ 250 per purchase order 160 purchase orders
Setups $ 450 per setup 80 setups
Repairs $ 36 per job 700 jobs
Resources
supplied:
Materials $ 192,700
Purchasing $ 44,300
Setups $ 37,500
Repairs $ 30,000
The unused resource capacity for repairs for South Beach is:
A. $4,800.
B. $10,800.
C. $6,000.
D. $3,600.
13. South Beach Industries reports the following information about resources. At the beginning of the
year, South Beach estimated it would spend $180,000 for materials, $42,000 for purchasing, $35,000
for setups, and $36,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Materials $ 10 per pound 18,350 pounds
Purchasing $ 250 per purchase order 160 purchase orders
Setups $ 450 per setup 80 setups
Repairs $ 36 per job 700 jobs
Resources supplied:
$
Materials
192,700
Purchasing $ 44,300
Setups $ 37,500
Repairs $ 30,000
The unused resource capacity for setups for South Beach is:
A. $2,500.
B. $1,080.
C. $1,500.
D. $1,000.
14. Express Travel decides to price delivery service according to the results of a recent activity-based
costing (ABC) study. The study indicates Express Travel should charge $16 per order, 1% of
annual order value for general delivery costs, $2.50 per item, and $45 for delivery.
A year later, Express Travel collected the following information for three of its customers:
Customer
Cost driver A Customer BCustomer C
Number of orders 18 8 12
Number of deliveries 10 10 24
Total number of items 2,000 4,000 12,000
Annual order value $ 120,000 $ 80,000 $ 100,000
What are the total delivery costs charged to Customer C during the year?
A. $16,863
B. $20,000
C. $31,272
D. $32,272
15. Express Travel decides to price delivery services according to the results of a recent activity-based
costing (ABC) study. The study indicates Express Travel should charge $15 per order, 1% of
annual order value for general delivery costs, $2.90 per item, and $50 for delivery.
A year later, Express Travel collected the following information for three of its customers:
Cost driver Customer A Customer B Customer C
Number of orders 22 12 16
Number of deliveries 10 10 30
Total number of items 2,000 4,000 12,000
$
Annual order value $ 124,000 $ 104,000
84,000
What are the total delivery costs charged to Customer B during the year?
A. $13,435
B. $13,120
C. $10,800
 D. $11,920
16. Benton Company is preparing its annual profit plan. As part of its analysis of the cost of its
purchasing activity, management estimates that the $48,000 for purchasing support should be
assigned to the individual vendors from the information given as follows:
Vendor A Vendor B
Units purchased 100,000 200,000
Purchase orders (annually) 6 24
Number of shipments received 12 52
What is the amount of the purchasing costs that should be allocated to Vendor B, assuming Benton
uses number of shipments received to compute activity-based costs?
Note: Do not round intermediate calculations.
A. $9,000
B. $16,000
C. $32,000
D. $39,000
17. Benton Company is preparing its annual profit plan. As part of its analysis of the cost of its
purchasing activity, management estimates that the $48,000 for purchasing support should be
assigned to the individual vendors from the information given as follows:
Vendor A Vendor B
Units purchased 100,000 200,000
Purchase orders (annually) 6 24
Number of shipments received 12 52
What is the amount of the purchasing costs that should be allocated to Vendor B, assuming Benton
uses purchases orders to compute activity-based costs?
A. $9,600
B. $16,000
C. $32,000
D. $38,400
18. Republic Industries decides to price delivery services according to the results of a recent activity-
based costing (ABC) study. The study indicates Republic should charge $8 per order, 2% of annual
order value for general delivery costs, $1.25 per item, and $30 for delivery.
A year later, Republic collected the following information for two of its best customers:
Cost driver Customer C Customer D
Number of orders 18 8
Number of deliveries 10 10
Total number of items 2,000 4,000
Annual order value $ 120,000 $ 80,000
What are the total delivery costs charged to Customer C during the year?
A. $5,344
B. $5,364
C. $6,900
D. $6,964
19. Republic Industries decides to price delivery services according to the results of a recent activity-
based costing (ABC) study. The study indicates Republic should charge $8 per order, 2% of annual
order value for general delivery costs, $1.25 per item, and $30 for delivery.
A year later, Republic collected the following information for two of its best customers:
Cost driver Customer C Customer D
Number of orders 18 8
Number of deliveries 10 10
Total number of items 2,000 4,000
 Cost driver Customer C Customer D
Annual order value $ 120,000 $ 80,000
What are the total delivery costs charged to Customer D during the year?
A. $5,344
B. $5,364
C. $6,900
D. $6,964
20. Fence Industries is preparing its annual profit plan. As part of its analysis of the profitability of its
customers, management estimates that the $12,000 for sales support should be assigned to the
individual customers from the information given as follows:
Customer
Customer B
A
Units purchased 100,000 200,000
Purchase orders (annually) 5 20
What is the amount of the sales support costs that should be allocated to Customer B, assuming Fence
uses purchases orders to compute activity-based costs?
A. $2,400
B. $4,000
C. $8,000
D. $9,600

Chap 11
1. The Foxmoor Company produces three products, X, Y, and Z, from a single raw material input.
Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed
further at a total cost of $16,000 and then sold for $68,000. Product Y:
A. should be sold at the split-off point, rather than processed further.
B. would increase the company's overall net income by $18,000 if processed further and then sold.
C. would increase the company's overall net income by $68,000 if processed further and then sold.
D. would increase the company's overall net income by $2,000 if processed further and then sold.
2. Delite Confectionary Company produces various types of candies. Several candies could be sold at
the split-off point or processed further and sold in a different form after further processing. The
candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,
which are allocated based on pounds produced. Information concerning this process for a recent
month appears below:
Number of Price per pound at Further processing Price after processing
Candy type pounds split-off costs further
Sweet Meats 50,000 $8 $ 75,000 $ 10.00
Chocolate
100,000 $ 10 $ 30,000 $ 10.50
Delight
Minty Wonders 25,000 $5 $ 20,000 $ 5.50
If Chocolate Delight is processed further, the gross profit margin that will appear in a product line
income statement for Chocolate Delight would be:
Note: Do not round intermediate calculations.
A. $734,286.
B. $520,000.
C. $1,020,000.
D. $632,596.
3. Delite Confectionary Company produces various types of candies. Several candies could be sold at
the split-off point or processed further and sold in a different form after further processing. The
candies are produced in a joint processing operation with $500,000 of joint processing costs
 monthly, which are allocated based on pounds produced. Information concerning this process for a
recent month appears below:
Number of Price per pound at Further processing Price after processing
Candy type pounds split-off costs further
Sweet Meats 50,000 $8 $ 75,000 $ 10.00
Chocolate
100,000 $ 10 $ 30,000 $ 10.50
Delight
Minty Wonders 25,000 $5 $ 20,000 $ 5.50
The net advantage (disadvantage) of processing Sweet Meats further is:
A. a $25,000 disadvantage to process further.
B. a $32,143 advantage to process further.
C. a $25,000 advantage to process further.
D. a $282,143 disadvantage to process further.
4. Delite Confectionary Company produces various types of candies. Several candies could be sold at
the split-off point or processed further and sold in a different form after further processing. The
candies are produced in a joint processing operation with $500,000 of joint processing costs
monthly, which are allocated based on pounds produced. Information concerning this process for a
recent month appears below:
Number of Price per pound at Further processing Price after processing
Candy type pounds split-off costs further
Sweet Meats 50,000 $8 $ 75,000 $ 10.00
Chocolate
100,000 $ 10 $ 30,000 $ 10.50
Delight
Minty Wonders 25,000 $5 $ 20,000 $ 5.50
Based on the information presented, which of the products should be processed further?
A. Sweet Meats only
B. Both Sweet Meats and Chocolate Delight
C. Minty Wonders only
D. Both Sweet Meats and Minty Wonders
5. Cambridge Company manufactures three main products, L, M, and N, from a joint process.
Additional information for June production activity follows:
L M N Total
Units produced 50,000 40,000 10,000 100,000
Joint costs ? ? ? $ 450,000
Sales value at split-off $ 420,000 $ 270,000 $ 60,000 $ 750,000
Additional costs if process further $ 88,000 $ 30,000 $ 12,000 $ 130,000
Sale value if processed further $ 538,000 $ 320,000 $ 78,000 $ 936,000
Assuming that the 10,000 units of N were processed further and sold for $78,000, what was
Cambridge's gross profit from this sale? Assume the physical quantities method of allocation is used.
A. $21,000
B. $28,500
C. $30,000
D. $66,000
6. The Mallak Company produced three joint products at a joint cost of $100,000. Two of these
products were processed further. Production and sales were:
 Product Weight Sales Additional Processing Costs
P 300,000 pounds $ 245,000 $ 200,000
Q 100,000 pounds 30,000 0
R 100,000 pounds 175,000 100,000
What is the net income of Mallak Company if the estimated net realizable value method of joint cost
allocation is used?
A. $20,000
B. $50,000
C. $150,000
D. $350,000
7. The Mallak Company produced three joint products at a joint cost of $120,000. Two of these
products were processed further. Production and sales were:
Product Weight Sales Additional Processing Costs
pound
P 310,000 $ 262,500 $ 210,000
s
pound
Q 110,000 40,000 0
s
pound
R 110,000 197,500 110,000
s
Assume Q is a by-product and Mallak uses the cost reduction method of accounting for by-product
cost. If estimated net realizable value is used, how much of the joint costs would be allocated to product
R?
Note: Do not round intermediate calculations.
A. $44,445
B. $50,000
C. $60,000
D. $75,000
8. Upton Company produces two main products and a by-product out of a joint process. The ratio of
output quantities to input quantities of direct material used in the joint process remains consistent
from month to month. Upton has employed the physical quantities method to allocate joint
production costs to the two main products. The net realizable value of the by-product is used to
reduce the joint production costs before the joint costs are allocated to the main products. Data
regarding Upton's operations for the current month are presented in the chart below. During the
month, Upton incurred joint production costs of $3,032,280. The main products are not marketable
at the split-off point and, thus, have to be processed further.
First Main Product Second Main Product By-Product
Monthly output in
98,400 160,500 66,300
pounds
Selling Price per pound $ 22 $ 12 $2
Separable process costs $ 590,400 $ 706,200
The amount of joint production cost that Upton would allocate to the Second Main Product by using
the physical quantities method to allocate joint production costs would be:
Note: Round the numbers to two decimals.
A. $1,497,600.
B. $1,557,600.
C. $1,797,802.
D. $1,879,803.
9. Tanner Corporation produced 3,660 units, consisting of three separate products, in a joint process
for the year. The market for these products was so unstable that it was not practical to estimate the
selling price of the products. A cost of $425,000 was incurred in the joint process. Product X's
production was 80% of product Y's while product Z's production was 125% of product Y's. What
is the amount of the joint cost allocable to product X assuming Tanner uses the physical quantities
method of allocation?
Note: Round the numbers to four decimals.
A. $111,435
B. $114,865
C. $139,344
D. $141,667
10. Atkinson, Incorporated, manufactures products A, B, and C from a common process. Joint costs
were $60,000. Additional information is as follows:
If Processed Further
Produc Units Sales Value at Split- Sales Additional
t Produced Off Value Costs
A 6,000 $ 40,000 $ 55,000 $ 4,000

B 4,000 35,000 45,000 6,000

C 2,000 25,000 30,000 8,000

$
12,000 $ 100,000 $ 18,000
130,000
Assuming that joint product costs are allocated using the net realizable value method, what were the
total costs assigned to Product B?
A. $26,000
B. $26,796
C. $27,000
D. $28,286
11. The following is a system of simultaneous linear equations to allocate costs using the reciprocal
method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service departments in
Westmoreland Company.
Department Direct Costs Label
Subassemblies $ 550,000 P1
Final assembly 775,000 P2
Marketing 285,000 P3
Building occupancy 85,000 S1
Research & development 120,000 S2
Supervision 45,000 S3
Use of services by other departments is as follows.
 User Departments
Service Cost Sub- Final Marketin Building R& Supervisio
Center assemblies Assembly g Occupancy D n
Building
0.30 0.25 0.20 --- 0.15 0.10
occupancy
R&D 0.50 0.50 --- --- --- ---

Supervision 0.20 0.30 0.20 0.10 0.20 ---

The equation for department S3 (supervision) is:
A. S3 = $45,000 + 0.90S1 + 0.10S2.
B. S3 = $45,000 + 0.10S1.
C. S3 = $45,000 + 1.00S1.
D. S3 = 0.10S1.
Supervision has $45,000 in direct costs and 10% of Building Occupancy.

Proportion of service by A to:

Proportion of service by B to:
12. The following information relates to B 10% A 30%
Osceola Corporation for the past C 60%
accounting period. C 20%
D 30%
Direct costs D 50%
Service Department A $ 80,000
Service Department B 60,000
Producing Department
15,000
C
Producing Department
20,000
D
Using the reciprocal (simultaneous solution) method, Department B's cost allocated to Department C
is:
A. $29,021.
B. $14,021.
C. $13,192.
D. $7,794.
Proportion of service by B to:
Proportion of service by A to:
13. The following information relates to B 10% A 30%
Osceola Corporation for the past C 60% C 20%
accounting period. D 30% D 50%
Direct costs
Service Department A $ 99,600
Service Department B 70,200
Producing Department
19,400
C
Producing Department
31,000
D
Using the reciprocal (simultaneous solution) method, Department B's cost allocated to Department C
is:
A. $35,928.
B. $16,528.
C. $15,699.
 D. $10,301.
14. The following is a system of simultaneous linear equations to allocate costs using the reciprocal
method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service departments in
Westmoreland Company.
Department Direct Costs Label
Subassemblies $ 550,000 P1
Final assembly 775,000 P2
Marketing 285,000 P3
Building occupancy 85,000 S1
Research and
120,000 S2
development
Supervision 45,000 S3
Use of services by other departments is as follows.
User Departments
Service Cost Sub- Final Marketin Building R& Supervisio
Center assemblies Assembly g Occupancy D n
Building
0.30 0.25 0.20 --- 0.15 0.10
occupancy
R&D 0.50 0.50 --- --- --- ---
Supervision 0.20 0.30 0.20 0.10 0.20 ---
The equation for department P1 (subassemblies) is:
A. P1 = $550,000 + 0.25P2 + 0.20P3 + 0.15S2 + 0.10S3.
B. P1 = $550,000 + 0.30S1 + 0.50S2 + 0.20S3.
C. P1 = 0.30S1 + 0.50S2 + 0.20S3.
D. P1 = 0.30S1 + 0.50S.
15. Palace Company has two service departments and two user departments. The number of employees
in each department is:
Personnel 10

Cafeteria 25

Producing Department A 265

Producing Department B 250

550
The fixed costs of the Personnel Department are allocated on the basis of the number of employees. If
these costs are budgeted at $37,125 during a given period, the amount of cost allocated to the Cafeteria
under the step method would be:
Note: Do not round intermediate calculations.
A. $0.00
B. $1,718.75.
C. $1,687.50.
D. $1,802.18.
16. Cordner Corporation has two production departments, P1 and P2, and two service departments, S1
and S2. Direct costs for each department and the proportion of service costs used by the various
departments for the month of July are as follows:
 Proportion of Services Used by:
Department Direct costs S1 S2 P1 P2
S1 $ 60,000 0.70 0.10 0.20
$
S2 0.20 0.30 0.50
100,000
$
P1
160,000
$
P2
140,000
Under the step method of cost allocation, the amount of costs allocated from S2 to P2 would be:
Note: Do not round intermediate calculations.
A. $88,750.
B. $50,000.
C. $62,500.
D. $53,250.
17. Cordner Corporation has two production departments, P1 and P2, and two service departments, S1
and S2. Direct costs for each department and the proportion of service costs used by the various
departments for the month of July are as follows:
Proportion of Services Used by:
Department Direct costs S1 S2 P1 P2
S1 $ 60,000 0.70 0.10 0.20
$
S2 0.20 0.30 0.50
100,000
$
P1
160,000
$
P2
140,000
Under the step method of cost allocation, the amount of S2 costs allocated to S1 would be:
A. $40,000.
B. $20,000.
C. $0.
D. $42,000.
18. Cordner Corporation has two production departments, P1 and P2, and two service departments, S1
and S2. Direct costs for each department and the proportion of service costs used by the various
departments for the month of July are as follows:
Proportion of Services Used by:
Department Direct costs S1 S2 P1 P2
S1 $ 60,000 0.70 0.10 0.20
$
S2 0.20 0.30 0.50
100,000
$
P1
160,000
$
P2
140,000
Under the direct method of cost allocation, the amount of S1 costs allocated to P1 would be:
Note: Do not round intermediate calculations.
A. $20,000.
B. $6,000.
C. $30,000.
D. $62,500.
19. Cordner Corporation has two production departments, P1 and P2, and two service departments, S1
and S2. Direct costs for each department and the proportion of service costs used by the various
departments for the month of July are as follows:
Proportion of Services Used by:
Department Direct costs S1 S2 P1 P2
S1 $ 60,000 0.70 0.10 0.20
$
S2 0.20 0.30 0.50
100,000
$
P1
160,000
$
P2
140,000
Under the direct method of cost allocation, the amount of S1 costs allocated to S2 would be:
A. $42,000.
B. $20,000.
C. $0.
D. $6,000. Under the direct method, service department costs are not allocated to another
service department, only production departments.
20. Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue
generating (production) operations are supported by two service departments: Clerical and
Janitorial. Costs in the service departments are allocated in the following order using the designated
allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Number of Work Orders
Expected Average Labor Hours Square Footage
Septic Service 50 80 560 1,800
Legal advice 25 20 840 2,200
Clerical 20 20 400 1,600
Janitorial 5 20 200 1,000
Expected costs in the service departments for June are as follows:
Clerical Janitorial
Variable
$ 12,000 $ 4,200
costs
Fixed costs $ 8,400 $ 800
Under the direct method of allocation, what is the total amount of service cost allocated to the Legal
Advice operation for June?
A. $6,231
B. $7,720
C. $8,640
D. $9,330

Chap 12
1. Waterford Company maintains a cafeteria for its employees. For June, variable food costs were
budgeted at $45 per employee based on a budgeted level of 200 employees in other departments.
During the month, an average of 190 employees worked in other departments and actual food costs
totaled $9,250. How much food cost should be charged to the other departments at the end of the
month for performance evaluation purposes?
A. $9,000
B. $9,250
C. $8,550
D. $9,737

2. Poole Corporation's Maintenance Department provides services to the company's two operating
divisions — the Paints Division and the Stains Division. The variable costs of the Maintenance
Department are budgeted based on the number of cases produced by the operating departments. The
fixed costs of the Maintenance Department are budgeted based on the number of cases produced by
the operating departments during the peak period. Data appear below:
Maintenance Department:
Budgeted variable cost $ 5 per case
Budgeted total fixed cost $ 558,000
Actual total variable cost $ 322,504
Actual total fixed cost $ 561,490
Paints Division:
Percentage of peak period capacity required 30%
Budgeted cases 15,000
Actual cases 15,040
Stains Division:
Percentage of peak period capacity required 70%
Budgeted cases 47,000
Actual cases 46,980
For performance evaluation purposes, how much Maintenance Department cost should be charged to
the Stains Division at the end of the year?

A. $669,623 Stains
B. $637,339 Division
C. $625,500 Variable cost charges:
D. $657,584 $ 5 per case × 46,980 cases $ 234,900
Fixed cost charges:
3. The fixed costs of Black Company's personnel 70% × $ 558,000 390,600
department are allocated to operating departments on Total Maintenance
$ 625,500
the basis of direct labor-hours. The following data have Department charges
been provided:
Operating Department
X Y
Direct labor-hours — Long-run average 15,000 10,000
Direct labor-hours — Actual 10,000 6,000
The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in
order to support long-run average requirements. How much of this fixed cost should be charged to
Operating Department X at the end of the year for performance evaluation purposes?
A. $35,000
B. $33,600
 C. $52,500
D. $22,400
4. Darren Corporation's Maintenance Department provides services to the company's two operating
divisions — the Paints Division and the Stains Division. The variable costs of the Maintenance
Department are budgeted based on the number of cases produced by the operating departments. The
fixed costs of the Maintenance Department are budgeted based on the number of cases produced by
the operating departments during the peak period. Data appear below:
Maintenance Department:
Budgeted variable cost $ 2 per case
Budgeted total fixed cost $ 830,000
Paints Division:
Percentage of peak period capacity required 30%
Actual cases 20,000
Stains Division:
Percentage of peak period capacity required 70%
Actual cases 63,000
For performance evaluation purposes, how much Maintenance Department cost should be charged to
the Paints Division at the end of the year?
A. $298,800
B. $498,000
C. $289,000
D. $240,000
Paints Division
Variable cost charges:
$2 per case × 20,000 cases $ 40,000
Fixed cost charges:
30% × $830,000 249,000
Total Maintenance Department charges $ 289,000

5. The Document Creation Center (DCC) for Arlington Corporation provides photocopying and
document services for three departments in the Minneapolis office. The following budget has been
prepared for the year.
Available capacity 8,000,000 pages
Budgeted usage:
Software 1,600,000 pages
Development
Training 3,000,000 pages
Management 2,400,000 pages
Cost equation $280,000 + $0.03 per page
If DCC uses a dual-rate for allocating its costs, how much cost will be allocated to the Software
Development Department, assuming the Software Development Department actually made 1,780,000
copies during the year?
A. $117,400
B. $115,700
C. $124,600
D. $129,376
6. Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of
the company's computer server network. The annual common costs are $2,400,000. You have been
provided with the following information for the upcoming year:
 ConnectionsTime on Network (hours)
Commercia 60,000 120,000
l
Retail 80,000 150,000
Consumer 100,000 330,000
The cost accountant determined $1,700,000 of the server network's costs were fixed and should be
allocated based on the number of connections. The remaining costs should be allocated based on the
time on the network. What is total server network cost allocated to the Consumer Division, assuming
the company uses dual-rates to allocate common costs?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
A. $1,200,000
B. $1,093,333
C. $954,896
D. $750,000
7. The Copy Department in the College of Business at State University provides photocopying services
for both the Marketing and Economics Departments. The following budget has been prepared for the
year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated to the
Economics Department, assuming the Economics Department actually made 1,500,000 copies during
the year?
A. $77,500
B. $92,500
C. $132,500
D. $112,500 (1,800,000 ÷ 5,400,000 × $120,000) + ($.025 × 1,500,000) = $77,500
8. Barrington Box Enterprises has two divisions, large and small, that share the common costs of the
company's communications network. The annual common costs are $4,500,000. You have been
provided with the following information for the upcoming year:
Calls Time on Network (hours)
Larg 100,000 120,000
e
Small 80,000 330,000
The cost accountant determined $2,700,000 of the communication network's costs were fixed and
should be allocated based on the number of calls. The remaining costs should be allocated based on the
time on the network. What is total communication network costs allocated to the Small Box Division,
assuming the company uses dual-rates to allocate common costs?
A. $2,520,000
B. $1,800,000
C. $1,320,000
D. $1,200,000
9. The following is a summarized income statement for McClaron Manor Company's profit center
12608 for April:
Contribution Margin $ 175,000
Period Expenses $ 11,000
Manager' s Salary $ 2,000
Corporate Expense $ 8,000 $ (21,000)
 Allocation
Net Income $ 154,000
Which of the following amounts is most likely subject to the control of the profit center's manager?
(CMA adapted)
A. Contribution Margin of $175,000
B. Contribution Margin of $175,000 and Period Expenses of $11,000
C. Contribution Margin of $175,000 and Period Expenses of $13,000
D. Contribution Margin of $175,000 and Period Expenses of $21,000

10. The following is a summarized income statement for McClaron Manor Company's profit center
12608 for April:
Contribution Margin $ 182,000
Period Expenses $ 18,000
Manager' s Salary $ 2,700
Corporate Expense
$ 8,700 $ (29,400)
Allocation
Net Income $ 152,600
Which of the following amounts is most likely subject to the control of the profit center's manager?
(CMA adapted)
A. Contribution Margin of $182,000
B. Contribution Margin of $182,000 and Period Expenses of $18,000
C. Contribution Margin of $182,000 and Period Expenses of $20,700
D. Contribution Margin of $182,000 and Period Expenses of $29,400
11. Barrington Box Enterprises has two divisions, large and small, that share the common costs of the
company's communications network. The annual common costs are $4,420,000. You have been
provided with the following information for the upcoming year:
Calls Time on Network (hours)
Larg 140,000 151,000
e
Small 120,000 274,000
What is the allocation rate for the upcoming year, assuming Barrington Box uses the single-rate
method and allocates common costs based on the number of calls?
A. $10.40
B. $13.09
C. $34.03
D. $17.00
12. The Copy Department in the College of Business at State University provides photocopying services
for both the Marketing and Economics Departments. The following budget has been prepared for the
year.
Available capacity 8,300,000 pages
Budgeted usage:
Marketing 5,500,000 pages
Economics 2,750,000 pages
Cost equation $ 177,000 + $ 0.060 per page
If the Copy Department uses a dual-rate for allocating its costs based on usage, how much cost will be
allocated to the Marketing Department?
A. $224,000
B. $330,000
C. $498,000
 D. $448,000
13. Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of
the company's computer server network. The annual common costs are $2,400,000. You have been
provided with the following information for the upcoming year:
ConnectionsTime on Network (hours)
Commercia 69,000 102,000
l
Retail 59,000 120,000
Consumer 112,000 378,000
What is the allocation rate for the upcoming year, assuming Mesa Telcom uses the single-rate method
and allocates common costs based on the number of connections?
A. $10.00
B. $13.26
C. $23.53
D. $34.78
14. The Document Creation Center (DCC) for Arlington Corporation provides photocopying and
document services for three departments in the Minneapolis office. The following budget has been
prepared for the year.
Available capacity 8,300,000 pages
Budgeted usage:
Software 1,900,000 pages
Development
Training 3,300,000 pages
Management 2,700,000 pages
Cost equation $296,000 + $0.05 per page
If DCC uses a dual-rate for allocating its costs based on usage, how much cost will be allocated to the
Software Development Department?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
A. $228,810
B. $102,380
C. $166,190
D. $415,000
15. Darren Corporation's Maintenance Department provides services to the company's two operating
divisions — the Paints Division and the Stains Division. The variable costs of the Maintenance
Department are budgeted based on the number of cases produced by the operating departments. The
fixed costs of the Maintenance Department are budgeted based on the number of cases produced by
the operating departments during the peak period. Data appear below:
Maintenance Department:
Budgeted variable cost $ 3 per case
Budgeted total fixed cost $ 841,000
Paints Division:
Percentage of peak period capacity required 30%
Actual cases 22,000
Stains Division:
Percentage of peak period capacity required 70%
Actual cases 65,000
For performance evaluation purposes, how much Maintenance Department cost should be charged to
the Paints Division at the end of the year?
A. $301,600
B. $479,700
 C. $318,300
D. $341,000
Paints Division
Variable cost charges:
$3 per case × 22,000 cases $ 66,000
Fixed cost charges:
30% × $841,000 252,300
Total Maintenance Department charges $ 318,300

16. The fixed costs of Black Company's personnel department are allocated to operating departments
on the basis of direct labor-hours. The following data have been provided:
Operating Department
X Y
Direct labor-hours — Long-run average 16,000 11,000
Direct labor-hours — Actual 11,000 7,000
The fixed costs of the personnel department are budgeted at $58,500 per year and are incurred in
order to support long-run average requirements. How much of this fixed cost should be charged to
Operating Department X at the end of the year for performance evaluation purposes?
Note: Do not round intermediate calculations.
A. $38,000
B. $36,000
C. $51,591
D. $24,750
17. Poole Corporation's Maintenance Department provides services to the company's two operating
divisions — the Paints Division and the Stains Division. The variable costs of the Maintenance
Department are budgeted based on the number of cases produced by the operating departments. The
fixed costs of the Maintenance Department are budgeted based on the number of cases produced by
the operating departments during the peak period. Data appear below:
Maintenance Department:
Budgeted variable cost $ 6 per case
Budgeted total fixed cost $ 563,000
Actual total variable cost $ 327,504
Actual total fixed cost $ 566,490
Paints Division:
Percentage of peak period capacity required 25%
Budgeted cases 20,000
Actual cases 20,040
Stains Division:
Percentage of peak period capacity required 75%
Budgeted cases 52,000
Actual cases 51,980
For performance evaluation purposes, how much Maintenance Department cost should be charged to
the Stains Division at the end of the
year? Stains Division
A. $736,868 Variable cost charges:
B. $736,748 $ 6 per case × 51,980 cases $ 311,880
C. $734,130 Fixed cost charges:
D. $734,250 75% × $ 563,000 422,250
Total Maintenance Department charges $ 734,130
18. Waterford Company maintains a cafeteria for its employees. For June, variable food costs were
budgeted at $65 per employee based on a budgeted level of 200 employees in other departments.
During the month, an average of 190 employees worked in other departments and actual food costs
totaled $13,250. How much food cost should be charged to the other departments at the end of the
month for performance evaluation purposes?
A. $13,000
B. $13,250
C. $12,350
D. $13,947
19. Which one of the following firms is likely to experience dysfunctional motivation on the part of its
managers due to its allocation methods? (CMA adapted)
A. To allocate depreciation of forklifts used by workers at its central warehouse, Amir Electronics
uses predetermined amounts calculated on the basis of the long-term average use of the services
provided by the warehouse to the various segments.
B. Seattle Electronics uses the sales revenue of its various divisions to allocate costs connected with
the upkeep of its headquarters building. It also uses ROI to evaluate the divisional performance.
C. Rose Industrial does not allow its service departments to pass on their cost overruns to
production departments.
D. Xi Enterprises' management information system (MIS) is operated out of headquarters and
serves its various divisions. Xi's allocation of MIS-related costs to its divisions is limited to costs
the divisions will incur if they were to outsource their MIS needs.
20. The Sarbanes-Oxley Act of 2002 requires that management of publicly traded companies:
A. use investment centers to evaluate top managers.
B. report on the adequacy of the company's internal controls over financial reporting.
C. compensate managers with fixed compensation plans only.
D. eliminate stock options for managerial compensation.