FUNDAMENTALS OF COST ACCOUNTING 4TH EDITION
CHAPTER 11 PFORSICH COST ACCOUNTING
MANAGEMENT EXAM REVIEW 2026/2027 || MULTIPLE
QUESTIONS WITH 100% CORRECT ANSWERS || EXPERT-
VERIFIED & GRADED A+ || BLUEPRINT FOR GUARANTEED
SUCCESS!!!
Two methods of Joint Cost Allocation - CORRECT ANSWER -1) Net
realizable Value 2) Physical quantities Method. Acceptable for financial
reporting but must be careful with decision making due to arbitrariness in joint
cost allocations
Why service costs are allocated - CORRECT ANSWER -To inform managers
about the costs of running departments that use the services of other
departments. Also required for external financial reporting and tax purposes.
Allocating service department costs using Direct Method - CORRECT
ANSWER -Allocates service department costs to user departments and ignores
any services used by other service departments. no inter-service-department
allocation
Define Cost Allocation - CORRECT ANSWER -Cost allocation is the process
of assigning common costs to two or more cost objects.
Define Service Department cost allocation - CORRECT ANSWER -Ensures
that costs of support services are included in costs of products.
Three methods of service department cost allocation - CORRECT ANSWER -
1) Direct 2) Step 3) Reciprocal
Joint Cost Allocation - CORRECT ANSWER -Assigns common costs to two
or more products manufactured from a common input.
Allocating service department costs using Step Method - CORRECT
ANSWER -Based on allocation order, allocates service department costs to
, other service departments and then to production departments. Partial inter-
service-department allocation
Allocating service department costs using Reciprocal Method - CORRECT
ANSWER -Simultaneous allocation of service department costs to and from all
other service departments. Fully recognizes inter-service-department activities
Why Joint Costs are allocated - CORRECT ANSWER -To assign common
costs to two or more products manufactured from a common input.
Joint costs with Net Realizable Value Method - CORRECT ANSWER -
Allocates joint costs to products in proportion to their relative sales values.
Joint Costs with physical quantities method - CORRECT ANSWER -
Allocates joint costs to products in proportion to a physical measure
How cost data is used in sell-or-process further decision. - CORRECT
ANSWER -Joint costs are irrelevant
Why do companies allocate costs? - CORRECT ANSWER -To estimate or
assess the costs of their activities
Disadvantages of allocating costs - CORRECT ANSWER -1) Additional
Bookkeepting, 2) Additional management costs 3) Costs of making the wrong
decision if allocations provide misleading information
Advantages of allocating costs - CORRECT ANSWER -1) Responsibility for
all costs of the company in the division managers 2) Relate indirect costs to
contracts, jobs and products 3) Construct more meaningful performance
measures
CHAPTER 11 PFORSICH COST ACCOUNTING
MANAGEMENT EXAM REVIEW 2026/2027 || MULTIPLE
QUESTIONS WITH 100% CORRECT ANSWERS || EXPERT-
VERIFIED & GRADED A+ || BLUEPRINT FOR GUARANTEED
SUCCESS!!!
Two methods of Joint Cost Allocation - CORRECT ANSWER -1) Net
realizable Value 2) Physical quantities Method. Acceptable for financial
reporting but must be careful with decision making due to arbitrariness in joint
cost allocations
Why service costs are allocated - CORRECT ANSWER -To inform managers
about the costs of running departments that use the services of other
departments. Also required for external financial reporting and tax purposes.
Allocating service department costs using Direct Method - CORRECT
ANSWER -Allocates service department costs to user departments and ignores
any services used by other service departments. no inter-service-department
allocation
Define Cost Allocation - CORRECT ANSWER -Cost allocation is the process
of assigning common costs to two or more cost objects.
Define Service Department cost allocation - CORRECT ANSWER -Ensures
that costs of support services are included in costs of products.
Three methods of service department cost allocation - CORRECT ANSWER -
1) Direct 2) Step 3) Reciprocal
Joint Cost Allocation - CORRECT ANSWER -Assigns common costs to two
or more products manufactured from a common input.
Allocating service department costs using Step Method - CORRECT
ANSWER -Based on allocation order, allocates service department costs to
, other service departments and then to production departments. Partial inter-
service-department allocation
Allocating service department costs using Reciprocal Method - CORRECT
ANSWER -Simultaneous allocation of service department costs to and from all
other service departments. Fully recognizes inter-service-department activities
Why Joint Costs are allocated - CORRECT ANSWER -To assign common
costs to two or more products manufactured from a common input.
Joint costs with Net Realizable Value Method - CORRECT ANSWER -
Allocates joint costs to products in proportion to their relative sales values.
Joint Costs with physical quantities method - CORRECT ANSWER -
Allocates joint costs to products in proportion to a physical measure
How cost data is used in sell-or-process further decision. - CORRECT
ANSWER -Joint costs are irrelevant
Why do companies allocate costs? - CORRECT ANSWER -To estimate or
assess the costs of their activities
Disadvantages of allocating costs - CORRECT ANSWER -1) Additional
Bookkeepting, 2) Additional management costs 3) Costs of making the wrong
decision if allocations provide misleading information
Advantages of allocating costs - CORRECT ANSWER -1) Responsibility for
all costs of the company in the division managers 2) Relate indirect costs to
contracts, jobs and products 3) Construct more meaningful performance
measures
