Question

Which of the following statements concerning the use of support department and joint cost allocations for performance evaluations is not true?

a. A manager may not be responsible for the allocation of support department costs if he or she cannot control the square footage of the areas upon which cost allocations are based.

b. A manager may miss a performance target because direct materials costs are too high.

c. A manager may miss a performance target because he or she has no control over the joint processes prior to his or her department which is after the split-off point.

d. It is rare to need further investigation beyond a preliminary analysis when a manager misses a performance target.

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Lorie Tallerico, a production manager for Caroline County Granite Works, misses a performance target by going over budgeted costs. Which of the following is a possible reason this happened?

a. Materials may have been wasted in the production process.

b. Direct materials costs may be too high.

c. Support department costs were allocated heavily to Lorie's department.

d. All of these choices are correct.

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When a single manufacturing process, such as the production of pharmaceuticals and medicines, generates multiple outputs, it is called a

a. joint manufacturing process.

b. joint product.

c. split-off product.

d. split manufacturing process.

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The final step in all three methods (direct, sequential, and reciprocal services) of allocating $600,000 in support department costs to production departments is to

a. allocate support department costs by multiplying the support department costs by the percentage usage of each department.

b. directly trace and distribute overhead costs to support and production departments.

c. determine the usage of the support department cost driver by each department.

d. apply production department costs to products.

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Delicious Dairy has 400 gallons of heavy cream and 1,500 gallons of skimmed milk and has incurred $2,000 of joint costs at the split-off point. It can sell each product at the split-off point or process it further in relatively similar processes, so management has decided that the most appropriate method for allocating joint costs is the market value at split-off point. One gallon of cream sells for $10, while one gallon of milk sells for $4. How much of the joint cost is allocated to cream? (Round percentage calculations to the nearest whole percent.)

a. $600

b. $800

c. $1,333

d. $2,000

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Cherry Valley Lumber's (CVL) lumber mill produces boards of various sizes and quality specifications for the home construction industry. CVL incurs joint costs in the initial phases of processing raw timber, such as transporting the logs to the mill, removing the bark from the logs, and cutting rough-cut boards. After the split-off point, CVL incurs costs in the Planing Department to finalize the finished boards of various grades and sizes. In which of the following scenarios would it be more appropriate for CVL to use the market value at split-off method of joint cost allocation?

a. When CVL's process is simple and there is little difference between the market values of the joint products at split-off.

b. When one or more of CVL's products is sold at split-off and the other products require little further processing beyond split-off.

c. When CVL's products require extensive and complicated processing beyond the split-off point and none of the products are sold at split-off.

d. When CVL's products are easily measured by physical units that represent the relative market values of the final products.

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Cherry Valley Lumber's (CVL) lumber mill produces boards of various sizes and quality specifications for the home construction industry. CVL incurs joint costs in the initial phases of processing raw timber, such as transporting the logs to the mill, removing the bark from the logs, and cutting rough-cut boards. After the split-off point, CVL incurs costs in the Planing Department to finalize the finished boards of various grades and sizes. Which of the following statements regarding the costs at CVL is true?

a. The costs to finish the boards after the split-off point will not be traced directly to the finished boards according to the various grades and sizes produced. The costs for transporting the logs, removing bark, and cutting the rough-cut boards before the split-off point will be traced to the final finished boards.

b. The costs for transporting the logs, removing bark, and cutting the rough-cut boards before the split-off point will not be directly traced to the final finished boards. All costs to finish the boards after the split-off point will be traced directly to the finished boards according to the various grades and sizes produced.

c. It will be impossible for CVL to directly trace any costs to the finished boards of various grades and sizes.

d. CVL will be able to directly trace all costs before and after the split-off point to the finished boards of various grades and sizes.

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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