Chapter 15: Allocation of Support-Department Costs, Common Costs, and Revenues Flashcards Preview

Managerial Accounting > Chapter 15: Allocation of Support-Department Costs, Common Costs, and Revenues > Flashcards

Flashcards in Chapter 15: Allocation of Support-Department Costs, Common Costs, and Revenues Deck (11)
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1
Q

Stand-Alone Cost-Allocation Method

A

Determines the weights for cost allocation by considering each user of the cost as a separate entity.

2
Q

Incremental Cost-Allocation Method

A

Ranks users in order of use and allocates actual costs based on rank, then what is remaining is allocated to the lowest rank.

3
Q

What are the 2 ways the U.S. government reimburses contractors?

How is this related to allocating costs?

A
  1. The contractor is paid a set price without breaking down the actual cost data.
  2. The contractor is paid after an analysis of actual cost data. Sometimes resulting in a costs-plus contract.

These terms often give clear guidelines on how allocation of costs should be done under the Cost Accounting Standards Board (CASB).

4
Q

Revenue allocation

A

Occurs when revenues are related to a particular revenue object but cannot be traced to it in a cost-effective way.

5
Q

Common Costs

A

The cost of operating an activity that is shared by 2 or more users.

This cost is lower than the individual cost of the activity to each user.

6
Q

Step-Down Method

A

Allocates support costs to other support departments in a sequence, then allocates to operations.

7
Q

Direct Method

A

Allocates support costs only to operations.

Does not allocate support cost to other support departments.

8
Q

Single-rate Method

A

Allocates costs in each service department to each production department using the same rate per unit of a single allocation base.

No distinction is made between fixed and variable costs.

9
Q

Dual-rate Method

A

Segregates costs within each cost pool into variable**-cost pool and **fixed-cost pool.

Each pool uses a different cost-allocation base.

10
Q

Reciprocal Method

A

Allocates all support costs of other support departments to each other, then operations.

11
Q

What are the 3 methods used to allocate the costs of reciprocal support departments?

A
  1. Direct Method
  2. Step-Down Method
  3. Reciprocal Method