Chapter 15 Period Cost Allocation

Question 1

Allowable Costs

Answer 1

Cost that the contract parties agree to include in the costs to be reimbursed (p.617)

Question 2

Artificial Costs

Answer 2

Another term for Reciprocated Cost. It is the Reciprocal Allocation Method where the support divisions allocate costs to each other before allocating to the production divisions

Question 3

Common Costs

Answer 3

A cost of operating a facility, operation, or activity where there is only 1 cost to allocate and it is shared by multiple users.

Question 4

Core Divisions

Answer 4

A core division adds value to the output which the customer will pay for.

Question 5

Direct Allocation Method

Answer 5

The service cost allocation method where the services provided to another support division are ignored. The cost pools are then distributed among the production divisions.

Question 6

Dual-rate method

Answer 6

The fixed and variable costs of each support department are separated into separate cost pools. Then, the fixed cost rate is applied to budgeted hours and the variable cost rate is applied to actual hours.

Question 7

Full Product Costing

Answer 7

A full Product Costing is when the sales price of an object allows the full recovery of all costs generated by the business functions in the value chain.

Question 8

Incremental Cost Allocation Method

Answer 8

The incremental cost allocation method is used to allocate common costs. The primary party receives costs up to its original cost and the remaining costs go to the incremental party

Question 9

Operating Department

Answer 9

Also called a Production Department, it directly adds value to a product or service

Question 10

Operating Division

Answer 10

The ensemble of operating (production) departments in a business.

Question 11

Production Department

Answer 11

Also called an Operating Department, it directly adds value to a product or service

Question 12

Production Division

Answer 12

The ensemble of operating (production) departments in a business.

Question 13

Reciprocal Allocation Method

Answer 13

A further application of the step-down cost allocation method. Linear formulae are created to find inter-support division allocations. Then, the support division costs are allocated to each production division.

Question 14

Reciprocated Cost

Answer 14

Another term for Artificial Cost. It is the Reciprocal Allocation Method where the support divisions allocate costs to each other before allocating to the production divisions

Question 15

Sequential Method

Answer 15

Another term for the step-down cost allocation method. Only recognizes the services provided by one support department. Usually, it is the one that has performed more services to service departments. The remaining is then applied to the operating divisions.

Question 16

Service Department

Answer 16

Also called a support department, it provides services that assist other internal departments

Question 17

Single-rate Method

Answer 17

The single-rate allocation method makes no distinction between fixed and variable costs by using the same rate per unit of a single allocation base.

Question 18

Stand-alone Cost Allocation

Answer 18

The stand-alone cost allocation method allocates common costs by assigning weights to each cost object and allocating appropriately.

Question 19

Step Allocation Method

Answer 19

Another term for the step-down cost allocation method. Only recognizes the services provided by one support department. Usually, it is the one that has performed more services to service departments. The remaining is then applied to the operating divisions.

Question 20

Step-down Method

Answer 20

The step-down cost allocation method only recognizes the services provided by one support department. Usually, it is the one that has performed more services to service departments. The remaining is then applied to the operating divisions.

Question 21

Support Department

Answer 21

Also called a service department, it provides services that assist other internal departments

Question 22

What are the synonyms for a support department cost?

Answer 22

Support department costs, period Overhead costs, operating expenses

Question 23

What are the Upstream or pre-production indirect costs / Operating Expenses / Period Costs Business Functions?

Answer 23

1. R&D (Upstream)
2. Design Costs
3. Production Costs
4. Production Costs (Total Production, Direct & Indirect Costs; CoGS)
5. Marketing Costs (Downstream)
6. Distribution Costs
7. Customer-Service Costs

Question 24

What are the Total Production, Direct & Indirect Costs, CoGS Business Functions?

Answer 24

1. R&D (Upstream)
2. Design Costs
3. Production Costs
4. Production Costs (Total Production, Direct & Indirect Costs; CoGS)
5. Marketing Costs (Downstream)
6. Distribution Costs
7. Customer-Service Costs

Question 25

What are the Downstream or Post-Production Indirect Costs Operating Expenses / Period Costs Business Functions?

Answer 25

1. R&D (Upstream) 2. Design Costs 3. Production Costs 4. Production Costs (Total Production, Direct & Indirect Costs; CoGS) 5. Marketing Costs (Downstream) 6. Distribution Costs 7. Customer-Service Costs

Question 26

Cost Assignment

Answer 26

Assigning Indirect and direct costs to a cost object

Question 27

Cost tracing

Answer 27

Assigning direct costs

Question 28

Cost Allocation

Answer 28

Assigning Indirect Costs

Question 29

Cost pool

Answer 29

Logical grouping of related cost objects