Answer the following questions using the information below:
Monster Vehicle Rental Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.
Car Rental Truck Rental
Number of Vehicles in fleet700 300
Number of employees15050
Sales$750,000$375,000
10) If administrative expense of $62,500 is allocated on the basis of number of employees, the amount allocated to the Truck Rental Department would be:
A) $37,500
B) $62,500
C) $46,875
D) $15,625
11) If administrative expense of $62,500 is allocated on the basis of number of employees, the amount allocated to the Car Rental Department would be:
A) $37,500
B) $62,500
C) $46,875
D) $15,625
12) If advertising expense of $75,000 is allocated on the basis of sales, the amount allocated to the Car Rental Department would be:
A) $50,000
B) $62,500
C) $25,000
D) $37,500
13) If advertising expense of $112,500 is allocated on the basis of sales, the amount allocated to the Truck Rental Department would be:
A) $56,250
B) $62,500
C) $37,500
D) $87,500
14) If the facility lease expense of $350,000 is allocated on the basis of vehicles in the fleet, the amount allocated to the Truck Rental Department would be:
A) $245,000
B) $105,000
C) $200,000
D) $150,000
15) If the facility lease expense of $350,000 is allocated on the basis of vehicles in the fleet, the amount allocated to the Car Rental Department would be:
A) $245,000
B) $105,000
C) $200,000
D) $150,000
16) Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:
A) a single activity accounts for a sizable portion of department costs
B) there are several homogeneous cost pools
C) different activities have the same cost-allocation base
D) different products use different resources in the same proportion
17) A key reason for using an ABC system rather than a department-costing system is because ABC assigns indirect costs:
A) using broader averages
B) more simply than a department-costing system
C) in a less costly manner
D) to reflect differences required by different processes as well as customers
18) ABC systems are a further refinement of department-costing systems.
19) ABC systems are useful in manufacturing, but NOT in the merchandising or service industries.
20) Costing systems with multiple cost pools are considered ABC systems.
21) Regarding department wide systems, the benefits of an ABC system must be balanced against its costs and limitations.
