Question

Which of the following methods of cost allocation is not one of the four common methods used to allocate the joint costs incurred in a production process?

a. Market value at split-off method

b. Weighted average method

c. Net realizable value method

d. Reciprocal services method

------------------------

Which of the following is not a support department?

a. The department that produces pizza boxes in a paper container manufacturing facility

b. The Janitorial Department in a plastic salad container manufacturing facility

c. The Machine Repair Department in a picture frame manufacturing facility

d. The Machine Maintenance Department that provides routine maintenance in a diesel engine manufacturing facility

-----------------

Which of the following statements about the allocation of support department services is true?

a. Support department services can be allocated using one of three different methods.

b. Support department services can be allocated using only one rate.

c. Support department services can be allocated to only one product.

d. Support department services can be allocated to only one department.

----------------

When comparing the results of using the direct, sequential, and reciprocal services methods of allocating support department costs to production departments, which of the following statements is true for a manufacturing company that has a total of $1,500,000 in support costs to allocate?

a. The reciprocal services method allocates more than $1,500,000 to the production departments.

b. The reciprocal services method can be viewed as a compromise on accuracy and difficulty in allocating the $1,500,000 because it considers some, though not all, inter-support-department services and is easier to compute than the direct method.

c. The sequential method can be viewed as a compromise on accuracy and difficulty in allocating the $1,500,000 because it considers some, though not all, inter-support-department services and is easier to compute than the reciprocal services method.

d. The direct method yields the most accurate allocation of the $1,500,000.

-------------------

Using the reciprocal services method, which of the following equations represents the algebraic expressions for the two equations needed to capture the total costs of a Janitorial Department (J) that includes not only $500,000 of direct costs but also 20% of the Maintenance Department (M) cost and a Maintenance Department that includes not only $250,000 of direct costs but also 40% of the Janitorial Department?

a. M = $500,000 + (0.20 × J) and J = $250,000 + (0.40 × J)

b. M = $500,000 + (0.20 × M) and J = $250,000 + (0.40 × J)

c. J = $500,000 + (0.20 × J) and M = $250,000 + (0.40 × M)

d. J = $500,000 + (0.20 × M) and M = $250,000 + (0.40 × J)

-------------

Which of the following is the correct rationale behind allocating support department costs to products?

a. Support department costs are impossible to trace to the facility, so they must be traced to the department.

b. The Institute of Management Accountants (IMA) requires the allocation of support department costs to products.

c. Support department services may be used more heavily by some products than others, and recording them as facility-level costs can result in inaccurate product costs.

d. Support department services are rarely used more heavily by some products than others, and it is best to record them at the facility level for more accurate product costing.

Answer 1

Requirement 1(Question 1):-

The correct answer for the question is Option D - Reciprocal services method.This method is not the common method that is used to allocate joint costs incurred in a production process.

Option A, Option B and Option C are all few of the common methods that are used to allocate the joint costs in a production process and hence are incorrect.

Requirement 2(Question 2):-

The correct answer for the question is Option A - The department that produces pizza boxes in a paper container manufacturing facility. This is not the support department as it is not directly related to the production of paper container manufacturing. As such, this is the correct answer.

Option B, Option C and Option D are all incorrect as all the departments mentioned under these options qualify as support departments for their respective production departments.

Kindly note that we are supposed to answer the first question posted per the HOMEWORKLIB RULESs based on which i have answered the first 2 questions above. Request you to post the remaining questions separately so that we can answer them as well. All the best and please let me know if you have any questions via comments :)