Three allocation methods can be used to allocate support departments costs to operating departments:Direct method, step-down method and reciprocal method.

Practical capacity is the amount that an entity can generate if the normal operating disruptions are considered. The correct answer is D. 

Three allocation methods can be used to allocate support departments costs to operating departments: • Direct method • Step-down method • Reciprocal method

Practical capacity is the amount that an entity can generate if the normal operating disruptions are considered

A cost pool is a collection of costs to be assigned to a set of cost objects.

The ccorrrect answer is C.

An operating department (also called a production department in manufacturing companies) adds value to a product or service that is observable by a customer. These departments are directly responsible for creating the products or services sold to customers. In a manufacturing setting such as an automobile manufacturer or a furniture manifacturer, production departments are those that work directly on the products being manufactured (e.g., assembly and painting).

The correct answer is D. İndirect labor costs incurred in a manufacturing company are tracked by 730 Manufacturing Overhead account.

A direct cost is a price that can be completely assigned to the production of specific goods or services.

Administration department deal with the revenue of operating departments?

Under the time-based system, the important point is the time that employee spends at work.

The correct answer to question is option A. The piece-based system focuses on output and ignores the time spent at work. Lack of this system is ignoring the competitiveness among employees to earn much more money. There are two main applications of this piece-based system; money accord and time accord.

For merchandising-sector organizations, inventoriable costs are the costs of purchasing the goods that are resold in the same form.

Lowest-in-First-Out is not one of them

Indirect costs are not directly identified with a cost object. Indirect costs of a particular cost object are costs that are related to that cost object but cannot be traced to it in an economically feasible or cost-effective way. Indirect costs often comprise a sizable percentage of the costs assigned to cost objects such as products, distribution channels, and customers. The four objectives for allocating indirect costs to these cost objects are as follows (Bhimani, Horngren, Datar and Rajan, 2015: 124):

1. To provide information for economic decisions,

2. To motivate managers and employees,

3. To justify costs or calculate reimbursement,

4. To measure income and assets for reporting to external parties

The correct answer is E.

The direct allocation method (often called the direct method) is the most widely used method of allocating support department costs. This method allocates each support department’s costs directly to the operating departments. In this method costs accumulated in service departments are allocated to the manufacturing departments depending on the services that each of the manufacturing department requires from each of the service department.

Operating department is directly responsible for creating the products or services sold to customers. 

Direct costs: These are the costs that are directly identified with a cost object.