Question

____ focuses on the relationship of activity inputs to activity outputs.

	a.	activity output measure
	b.	efficiency
	c.	velocity
	d.	activity drivers

Alsfeld Company has two service departments (S1 and S2) and two producing departments (A and B).  Department S1 serves Departments S2, A, and B in the following percentages, respectively: 10%, 35%, and 55%.  Department S2 serves Departments S1, A, and B in the following percentages, respectively: 0%, 60%, and 40%.  Direct department costs for S1, S2, A, and B are $300,000, $32,000, $420,000, and $390,000, respectively.  

If Alsfeld uses the step method (sequential) of allocating service department costs beginning with department S1, what is the total amount of cost that will be allocated from S2 to department A?

		$12,800
		$105,000
		$37,200
		-0-

When a company has scare (limited) resources, it should seek to?

	a.	maximize the contribution margin per unit of the scarce resource
	b.	maximize the contribution margin per unit of the scarce overhead costs
	c.	maximize the contribution margin per unit of the scare basis
	d.	maximize the contribution margin per unit of the scarce source

Answer 1

1) Answer is Option b.

Efficiency focuses on the relationship of activity inputs and activity outputs.

Ex: Activity efficiency is improved by producing the same activity output with less efficiency.

2) Answer is Option c.

Calc:

First determine the amount of S1 cost allocated to S2 10% * $300000= $30000

Add the S2 direct department cost = $32000

Toal S2 costs after S1 allocation = $62000

% of S2 costs to be allocated to Department A = 60%

S2 costs to be allocated to Department A is ( $62000*60%) =$37,200

3) Answer is Option a.

When a company has scare resources it should seek to maximize the contribution margin per unit of the scarce resource.

Thank you.