To discourage unnecessary use of a support department, management might ________.
allocate user department costs based upon support department usage
allocate support department costs based upon user department usage
allocate a fixed amount of support department costs to each and every department
allocate a fixed amount of user department costs to each and every department
The biggest advantage of using practical capacity to allocate costs is that it ________.
focuses the user's division with the costs of overused capacity
never causes over or under-allocated overhead
burdens the user divisions with the costs of unused capacity
focuses management's attention on unused capacity
The method that allocates costs by explicitly including all the services rendered among all support departments is the ________.
direct method
step-down method
reciprocal method
sequential method
A cost of operating a facility, department, activity area, or like cost object that is shared by two or more users is called a ________.
combined cost
distinct cost
fixed cost
common cost
Contract disputes regarding cost allocation can be reduced by defining ________.
the material items allowed for production
the terms used, such as what constitutes direct
permissible tax deductions
minimum profit level the company should earn
Tours Corp offers towing services, auto routing, travel brochures, and other travel services for one annual fee. This is an example of ________.
revenue tracing
revenue allocation
a bundled product
a business conglomerate
The method that ranks individual products in a bundle for revenue allocation is the ________.
stand-alone revenue-allocation method
incremental revenue-allocation method
unit-cost weighting method
physical-unit weighting method
Which of the following is a disadvantage of a dual-rate method?
It allocates fixed costs on the basis of budgeted long-run usage may tempt some managers to underestimate their planned usage.
It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
It allocates fixed and variable-cost pool using the same cost-allocation base, which will mislead managers in making decisions.
It does not guide department managers to make decisions that benefit both the organization as a whole and each department.
