Practice set for Chapters 15 and 16

1) The single-rate cost-allocation method may base the denominator choice on:
A) master-budget capacity utilization
B) normal capacity utilization
C) practical capacity
D) All of these answers are correct.

2) Benefits of the single-rate method include:
A) the low cost of implementation
B) fixed costs that are transformed into variable costs for user decision making
C) signals regarding how variable and fixed costs behave differently
D) information that leads to outsourcing decisions that benefit the organization as a whole

3) Benefits of the dual-rate method include:
A) variable costs that are transformed into fixed costs for user decision making
B) the low cost of implementation
C) avoidance of expensive analysis for categorizing costs as either fixed or variable
D) information that leads to outsourcing decisions that benefit the organization as a whole

4)The advantage of using practical capacity to allocate costs:
A) is that it allows a downward demand spiral to develop
B) is that it focuses management's attention on managing unused capacity
C) is that budgets are much easier to develop
D) Either A or B are correct.

Answer the following questions using the information below:

The Bonawitz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted costs of operating the copying facility for 200,000 to 300,000 copies: Fixed costs per year $30,000 Variable costs 3 cents (.03) per copy Budgeted long-run usage in copies per year: Marketing Department 60,000 copies Operations Department 190,000 copies

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by