Use the Information Below to Answer the Following Question(s)

question 145

Multiple Choice

Use the information below to answer the following question(s) .The owner of Hi-Tech Fiberglass Fabricators Inc.is interested in using the reciprocal allocation method.The following data from operations were collected for analysis.Budgeted manufacturing overhead costs:
Service furnished:
By Plant Maintenance (budgeted labour hours)
By Data Processing (budgeted computer time)

-Which of the following is a valid conclusion, in comparing the three allocation methods?

• A)The reciprocal method is conceptually inferior.
• B)The direct method is viewed as too complex by most organizations.
• C)The step-down method is viewed as too complex by most organizations.
• D)Many managers find the step-down method too simple.
• E)Many managers find the reciprocal method difficult to understand.

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Definitions:

Units Transferred Out

In process costing, this refers to the finished units that are moved out of a production process to the next process or to finished goods inventory.

Processing Department

A division within a manufacturing facility where a specific stage of production is carried out.

Cost Per Equivalent Unit

A calculation used in process costing to allocate costs among units of production, considering units partially completed at the end of a period.

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully completed units based on the percentage of completion.