Question

1) Which of the following describes who the direct allocation method allocates
support?department costs?

A. it allocates each support??department's costs to operating departments only
B. it requires managers to rank the support departments in the order that the step?down allocation is to proceed
C. it allocates support?department costs to operating departments by fully recognizing the mutual services provided among all support departments
D. it allocates support?department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

2) Which of the following is an advantage of using practical capacity to allocate? costs?

A. is that budgets are much easier to develop

B. is that it results in departments bearing a lower percentage of fixed costs

C. is that it focuses? management's attention on managing unused capacity

D. is that it allows a downward supply spiral to develop

3) Which of the following is a disadvantage of single?rate ?method?

A. It requires managers to distinguish variable costs from fixed? costs, which is often a challenging task.

B. It does not signal to department managers how variable costs and fixed costs behave differently.

C. It is very costly to implement.

D. It may lead operating department managers to make sub?optimal decisions that are in their own best interest.

Answer 1

1) Solution: it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

Explanation: direct allocation method allocates other support departments as well as to the operating departments in a sequential manner

2) Solution: is that it focuses management's attention on managing unused capacity

Explanation: The practical capacity refers to the maximum level of capacity that a person handle, taking into consideration the unavoidable delays

?

3) Solution: It may lead operating department managers to make sub-optimal decisions that are in their own best interest

Explanation: The single rate method refers to a policy of compensation wherein all employees are paid at the same rate