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Cost Accounting 101 Practice Test: Allocation of Support-Department Costs, Common Costs, and Revenues Basics
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Support-department costs: Cost allocation is the process of assigning common resource costs to cost objects or common costs.  The three steps in allocating costs are: Trace all overhead costs to a support or producing department Allocate support-department costs to the producing departments Allocate overhead costs to units of individual products using a predetermined overhead rate Common costs: Common costs include rent, phone and utilities, licenses and tax deposits, professional services, insurance, travel expenses, office and other administrative supplies, and marketing... Show more
Cost Accounting 101 Practice Test: Allocation of Support-Department Costs, Common Costs, and Revenues Basics
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25 Questions

1. The practical capacity method of allocating costs is:
2. When budgeted cost-allocations rates are used:
3. In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because:
4. The method LEAST likely to cause disputes among product managers is:
5. The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.
6. Under the stand-alone method of allocating common costs:
7. To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using:
8. The Shapley value method of allocating common costs considers each party as first the primary party and then the incremental party and computes an average allocation.
9. The support department allocation method that is the most widely used because of its simplicity is the:
10. Special cost-allocation problems arise when:
11. When budgeted cost-allocation rates are used, user-division managers face uncertainty about the allocation rates for that budget period.
12. The step-down allocation method:
13. The method that allocates costs in each cost pool using the same rate per unit is known as the:
14. Under the incremental revenue-allocation method, there is an incentive to be the last-ranked user.
15. ________ is a package of two or more products (or services) that is sold for a single price but whose individual components may be sold as separate items at their own stand-alone" prices."
16. Which of the following is NOT one of the three methods of allocating support department costs to operating departments?
17. The dual-rate method makes no distinction between fixed and variable costs.
18. The only choices that a firm has for support department cost allocation rates are to use either a budgeted rate or an actual rate.
19. Revenue allocation is required to determine the profitability of individual items within a bundled product.
20. The dual-rate cost-allocation method classifies costs in each cost pool into a:
21. The method that ranks individual products in a bundle for revenue allocation is the:
22. Which of the following departments is NOT a support department for a boat manufacturing company?
23. When using the single-rate method, fixed cost allocation may be based on:
24. In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.
25. When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.

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