Chapter 7

Question 1

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between:

Answer 1

the service departments

Question 2

A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect:

Answer 2

taxes in domestic and foreign countries

Question 3

What is the key implementation issue for cost allocation?

Answer 3

the choice of the most accurate allocation method

Question 4

Allocation of service department costs to producing departments is the most complex of the allocation phase of departmental cost allocation because of the likely presence of:

Answer 4

reciprocal flows

Question 5

An overhead cost that can be traced directly to either a service or production department:

Answer 5

is charged directly to that department

Question 6

Which of the following about joint costs is not true?

Answer 6

allocation is not always needed when joint costs are involved

Question 7

In making decisions about whether to sell or further process joint products or by-products, allocation of common or joint costs is:

Answer 7

irrelevant and should be ignored

Question 8

A concept which is commonly employed with allocation bases related to size is:

Answer 8

ability-to-bear

Question 9

Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department’s share of that service?

Answer 9

direct method

Question 10

Which one of the following methods of allocating joint costs uses a measure of weight, size or number of units to allocate joint costs to joint products?

Answer 10

physical measures method

Question 11

Which of the following is an advantage of the net realizable value method?

Answer 11

it produces an allocation that yields a predictable, comparable level of profitability among the products