Choose the best answer for each of the following questions.

1.			In service organizations, costs are normally allocated in a two stage process. Which of the following is correct about the allocation to each stage?
			A)	In the first stage, service department costs are allocated to operating departments and in the second stage costs are allocated from service departments to products and services.
			B)	In the first stage, service department costs are allocated to products and services and in the second stage costs are allocated from operating departments to products and services.
			C)	In the first stage, service department costs are allocated to operating departments and in the second stage costs are allocated from operating departments to products and services.
			D)	In the first stage, operating department costs are allocated to products and services and in the second stage costs are allocated from service departments to operating
2.			Which of the following is not an accepted approach to the allocation of costs of service departments to other departments?
			A)	Direct method
			B)	Indirect method
			C)	Step method
			D)	Reciprocal method
3.			Which of the following is true of the direct method of allocating costs of service departments to other departments?
			A)	It is more complex than other methods.
			B)	Allocations are made directly to other service departments.
			C)	The allocation base of the service departments is used when costs are allocated to operating departments.
			D)	The amount of the allocation base attributable to the operating departments is used in the allocation of service department costs.
4.			Which of the following is true of the step method of allocating costs of service departments to other departments?
			A)	It is simpler to use than any other method.
			B)	It is a sequential process.
			C)	After a service department's costs have been allocated, other service departments' costs are allocated back to it.
			D)	It is less accurate than other methods.
5.			Which of the following is true of the reciprocal method of allocating costs of service departments to other departments?
			A)	The reciprocal method gives only partial recognition to interdepartmental services
			B)	The reciprocal method always allocates forward never backward.
			C)	The reciprocal method is more commonly used than other methods.
			D)	The step method usually provides results that are a reasonable approximation of the results that the reciprocal method would provide.
6.			If variable costs are allocated at the beginning of the year, they should be allocated based on the level planned for consuming departments using which of the following formulas?
			A)	Variable cost allocated = Budgeted rate x Actual activity.
			B)	Variable cost allocated = Budgeted total ÷ Number of departments.
			C)	Variable cost allocated = Budgeted rate x Budgeted activity.
			D)	Variable cost allocated = Budgeted total x Actual activity.
7.			If variable costs are allocated at the end of the year, they should be allocated based on the level planned for consuming departments using which of the following formulas?
			A)	Variable cost allocated = Budgeted rate x Actual activity.
			B)	Variable cost allocated = Budgeted total ÷ Number of departments.
			C)	Variable cost allocated = Budgeted rate x Budgeted activity.
			D)	Variable cost allocated = Budgeted total x Actual activity.
8.			After allocations are made from service departments to operating departments, which of the following describes what the operating departments do with the information?
			A)	Allocations are ignored because operating departments have no control over them.
			B)	Allocations are included in performance evaluations and profitability evaluations of the operating departments.
			C)	Allocations are included in performance evaluations but not profitability evaluations of the operating departments.
			D)	Allocations are included in profitability evaluations but not performance evaluations of the operating departments.
9.			Robin Glen Golf Cart Connection has two divisions: a Golf Cart Division and a Small Engine Division. A single maintenance department provided services to both divisions. During peak periods, the maintenance department provided 500 hours of maintenance to the Golf Cart Division and 1,500 hours of maintenance to the Small Engine Division. What percentage of fixed costs should be allocated to the Golf Cart Division?
			A)	10%
			B)	25%
			C)	40%
			D)	55%
10.			Which is not true about the allocation of service department costs?
			A)	Allocations of fixed costs using variable allocation bases that fluctuate may potentially distort decisions and create inequities.
			B)	Allocations of fixed costs using variable allocation bases that fluctuate may potentially be heavily influenced by what happens in the other departments.
			C)	Sales dollars should be used as an allocation base only in those cases where service department costs are driven by sales.
			D)	Sales dollars normally provide an excellent allocation base for fixed service department costs.