Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 17, Problem 33P
Refer to the data given in Problem 17–26 for Celestial Artistry Company.
Required:
- 1. Use the reciprocal-services method to allocate service department costs. Calculate the
overhead rates per direct-labor hour for the Etching Department and the Finishing Department. - 2. Which of the three methods of service department cost allocation results in the most accurate overhead rates? Why?
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Students have asked these similar questions
What is the proper order of tasks in an ABC system?
a.identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the products
b.assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools
c.identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products
d.identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost pools
Compute the total overhead costs of the operating departments (Retail Shops and Online Shop) after the service department costs of Admin and HR have been allocated using
the direct method
the step-down (using the sequence of cost of service provided)
the reciprocal method
(b)Which method would you recommend that the company use to allocate service department costs? Why? You should consider different perspectives.
A department’s conversion costs are equal to the ________ and assigned direct labor costs.
Select answer from the options below
A. sum of its allocated overhead costs
B. difference between its materials costs
C. sum of its materials costs
D. difference between its allocated overhead costs
Chapter 17 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Should actual or budgeted service department costs...Ch. 17 - Prob. 4RQCh. 17 - Why does dual cost allocation improve the...Ch. 17 - What potential behavioral problem can result when...Ch. 17 - Should actual or budgeted service department costs...Ch. 17 - Explain the difference between two-stage...Ch. 17 - Define the following terms: joint production...Ch. 17 - Prob. 10RQ
Ch. 17 - Describe the relative-sales-value method of joint...Ch. 17 - Define the term net realizable value, and explain...Ch. 17 - Are joint cost allocations useful? If they are,...Ch. 17 - For what purpose should the managerial accountant...Ch. 17 - Prob. 15ECh. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Tuscaloosa National Bank has two service...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Breakfasttime Cereal Company manufactures two...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Refer to the data given in Exercise 1720....Ch. 17 - Prob. 23ECh. 17 - Prob. 24PCh. 17 - Prob. 25PCh. 17 - Celestial Artistry Company is developing...Ch. 17 - Snake River Sawmill manufactures two lumber...Ch. 17 - Travelcraft Company manufactures a complete line...Ch. 17 - Biondi Industries is a manufacturer of chemicals...Ch. 17 - Berger Company manufactures products Delta, Kappa,...Ch. 17 - Prob. 31PCh. 17 - Lafayette Company manufactures two products out of...Ch. 17 - Refer to the data given in Problem 1726 for...Ch. 17 - Prob. 34PCh. 17 - Top Quality Fruit Company, based on Oahu, grows,...Ch. 17 - Prob. 36C
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which is the correct formula for computing the overhead rate? A. estimated use of the cost driver for production/estimated overhead for the activity B. estimated overhead for the product/estimated use of the cost driver for the activity C. estimated use of the cost driver for production/estimated overhead for the activity D. estimated overhead for the activity/estimated use of the cost driver for the activityarrow_forwardWhat is the proper order of tasks In an ABC system? identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost pools assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the productsarrow_forwardFrenchys has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are: What is the predetermined overhead rate for each activity?arrow_forward
- Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.arrow_forwardRocks Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.arrow_forwardWhich is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costsarrow_forward
- A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity based costing: A. How much overhead would be assigned to each unit under the traditional allocation method? B. How much overhead would be assigned to each unit under activity-based costing?arrow_forwardQuestions: 1. What is the total cost assigned to Capping Department? 2. What is the total cost assigned to Machining Department?arrow_forwardPlease show your computations through excel. c. Compute the total service cost allocated to cutting department using RECIPROCAL method.arrow_forward
- Which of the following measures is appropriate as cost driver for personnel administrationcosts?a. direct labor hoursb. machine hoursc. number of employeesd. square feet of areaarrow_forwardThe overhead absorption rate used to allocate manufacturing overhead is calculated by: Select one: a. dividing the total estimated manufacturing overhead costs by the total estimated quantity of the allocation base b. dividing the total actual manufacturing overhead costs by the total estimated quantity of the cost driver c. dividing the total estimated manufacturing overhead by the total actual quantity of the cost driver d. dividing the total estimated quantity of the cost driver by the total estimated manufacturing overhead costsarrow_forwardThe direct method as used is one method that can be used to re-assign service department cost.Discuss two other methods that can be used to re-assign service department overheads.arrow_forward
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