What are the limitations of joint product and departmental cost allocation?

Q: What are the three methods of departmental cost allocation? Explain how they differ, which is…

A: Departmental cost allocation Departmental cost allocation refers to the allocation of overhead…

Q: Understand costclassifications used in makingdecisions: differential costs,opportunity costs, and…

A: Cost: The amount paid to purchase the asset, install it, and put it into operations, is referred to…

Q: Are joint cost allocations useful? If they are, for what purpose?

A: Definition: Joint cost: The total costs incurred prior to the split-off point where the joint…

Q: Why are support department costs difficult to apply to products?

A: Given: The difficulty in applying the support department costs on products.

Q: For what purpose should the managerial accountant be careful to not use joint cost allocations?

A: Joint costs: The total costs incurred prior to the split-off point, where the joint products are…

Q: Which is more consistent with cost-volume-profit analysis, variable costing or absorption costing?…

A: Absorption Costing: "Absorption costing is a method that allocates "direct labor, direct materials,…

Q: Why aren’t common fixed costs allocated to segments under the contribution approach?

A: Contribution approach income statement segregates variable and fixed costs. In this approach…

Q: in intended application between sales life-cycle analysis and life-cycle costing

A: The strategic pricing depends on the product price which it supported the worth it charges to the…

Q: Why are cost centers considered to be more appropriate than profit centers for production…

A:

Q: How does standard costing differ from actual costing?

A: Actual cost system: An actual cost system uses actual costs for “direct materials, direct labor, and…

Q: Briefly explain two factors that tend to result in product cost distortion under traditional,…

A: Traditional volume based product costing system is a costing system in which total factory overheads…

Q: Assuming that joint product costs are allocated using

A: The cost function is a function that is used to show how production expense will change at different…

Q: “Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.

A: Department Indirect Cost Rate:  Department indirect cost rate is the rate to find out the proportion…

Q: What are the challenges of using the incremental cost allocation method when allocating common costs…

A: Cost Allocation Method:   The cost allocation method is the method by which the costs to be assigned…

Q: What are support departments, and why are their costs allocated to other departments?  What process…

A: generally supporting departments are the departments that provide services to main departments. so…

Q: What are the major limitations of activity-based costing?

A:

Q: Why does dual cost allocation improve the resulting allocation of service department costs?

A: Dual Cost Allocation segregates total costs into two parts Fixed Costs. Variable Costs. Each…

Q: How does an engineered cost differ from a discretionary cost?

A:

Q: Why might the number of products in a joint cost situation differ from the number of outputs?

A: Products: Product is anything that has a worth or which is capable of being bought and sold in the…

Q: Which of the following is referred to as the second stage of cost allocation? O The allocation of…

A: Cost allocation is the assigning and allocating the cost to the specific objects, departments,…

Q: how to solve plantwide overhead rate versus departmental rates, effects on pricing decisions?

A: Since there are multiple sub parts in the question, calculation will be given for first three sub…

Q: Why is there often a conflict between the performance evaluation and cost-minimization objectives of…

A: SOLUTION- TRANSFER PRICING   IS THE ACCOUNTING PRACTICE THAT REPRESENTS THE PRICE THAT ONE DIVISION…

Q: What connection exists between unit profit and labor costs?

A: A cost is the amount of money that was expended during the production or delivery of a good or…

Q: How should mixed costs be classified in cost, volume, and profit analysis?

A: Based on the cost behaviour costs are classified as fixed costs , variable costs and mixed costs.…

Q: Explain a hybrid costing system. Identify a product or service operation that might be suited to a…

A: Hybrid Costing:   Hybrid costing is a method of cost accounting in which the elements of job and…

Q: Why do managers assign different costs to thesame cost objects?

A: A cost object can be defined as something to which the management feels the need to separately…

Q: What is the difference between joint costs and common costs?

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: Explain why some production costs must be assigned to products through an allocation process.

A: Production costs: These are the costs incurred on product manufacturing or delivering services by…

Q: What criteria might managers use to guide cost-allocation decisions? Which are the dominant…

A: Cost Allocation:The process of assigning the cost to the cost object is cost allocation. The cost…

Q: How would merging of two systems affect the costing of the new system including the impact on…

A: The act of distinguishing, investigating, , measuring, interpreting, and conveying the monetary data…

Q: What is the primary advantage of separately allocating fixed and variable indirect costs?

A: Solution Concept Fixed cost               Fixed cost are those cost which does not change with the…

Q: From a decision-making point of view, should joint costs be allocated among joint products?

A: Joint products means products which use the same resources and are made in the same process. For…

Q: What is the danger in allocating common fixed costs among product lines or other segmentsof an…

A: Fixed cost: It can be defined as the cost that does not vary with an increase or decrease in the…

Q: What are the pros/cons of product costing allocation methods and how they influence distortion of…

A: Product costing allocation methods are used to assign or allocate a cost to manufactured/produced…

Q: Identify the relative advantages and disadvantages of basing transfer prices on total costs,…

A: Please find the answers to the above questions below:

Q: What is a potential disadvantage of the reciprocal method? a. It is the most complex method of cost…

A: Reciprocal method: It is the method in which the allocation of costs spent on other departments by…

Q: What is the difference between cost leadership and product differentiation?

A: Cost leadership is a one of the effective marketing strategies. Despite being highly effective in…

Q: Using a physical measurement method, what amount of joint processing cost is allocated to product B?…

A: Cost accounting is one of the branches of accounting. Under this branch, all types of costs incurred…

Q: Why might the number of products in a joint - cost situation differ from the number of outputs? Give…

A: Products: Product is anything which has a worth or which is capable of being bought and sold in the…

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.