Question

The final step in all three methods (direct, sequential, and reciprocal services) of allocating $600,000 in support department costs to production departments is to

a.allocate support department costs by multiplying the support department costs by the percentage usage of each department. b.determine the usage of the support department cost driver by each department. c.apply production department costs to products. d.directly trace and distribute overhead costs to support and production departments.

Which of the following is the correct sequence of events for allocating support department costs to products?

a.Accumulate overhead costs, select an allocation method, allocate overhead costs to products, implement activity-based costing

b.Allocate overhead costs to products, accumulate overhead costs, select an allocation method

c.Accumulate overhead costs, select an allocation method, allocate overhead costs to products

d.Select an allocation method, implement activity-based costing, allocate overhead costs to products, accumulate overhead costs

Answer 1

Solution 1:

The final step in all three methods (direct, sequential, and reciprocal services) of allocating $600,000 in support department costs to production departments is to "allocate support department costs by multiplying the support department costs by the percentage usage of each department."

Hence option a is correct.

Solution 2:

Correct sequence of events for allocating support department costs to products is "Accumulate overhead costs, select an allocation method, allocate overhead costs to products"

Hence option c is correct.