CHAPTER 15
ALLOCATION OF SUPPORT DEPARTMENT COSTS,
COMMON COSTS, AND REVENUES

TRUE/FALSE

1. The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

Difficulty: 1 Objective: 1 Terms to Learn: dual-rate cost-allocation method The dual cost-allocation method classifies costs into two pools, a variable cost pool and a fixed cost pool.

2. Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

Difficulty: 3 Objective: 1 Terms to Learn: single-rate cost-allocation method

3. The single-rate cost-allocation method provides better information for decision making than the dual-rate method.

Difficulty: 2 Objective: 1 Terms to Learn: single-rate cost-allocation method, dual-rate cost-allocation method The dual-rate cost-allocation method provides better information for decision making than the single-rate method.

4. An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice.

Difficulty: 2 Objective: 1 Terms to Learn: single-rate method The single-rate method is the easiest cost allocation method, but it is the least accurate cost-allocation choice.

5. When budgeted cost-allocation rates are used, user-division managers face uncertainty about the allocation rates for that budget period.

Difficulty: 2 Objective: 2 Terms to Learn: single-rate cost-allocation method, dual-rate cost-allocation method When budgeted cost-allocation rates are used, user-division managers face no uncertainty about the allocation rates for that budget period.

6. When budgeted cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency.

Difficulty: 2 Objective: 2 Terms to Learn: single-rate cost-allocation method, dual-rate