1. Cake Co, Inc. has three operating departments. Information about these departments is listed below. Maintenance is service department at Cake Co that incurred $12,000 of costs during the period. If allocated maintenance cost is based on floor space occupied by each of the operating departments, compute the amount of maintenance cost allocated to the Baking Department.

a. $400.
b. $1,200.
c. $4,000.
d. $7,500.
e. $6,000.
2. A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $240,000, and the following quantities of product and sales revenues were produced.

How much of the $240,000 cost should be allocated to feed?
a. $24,500.
b. $84,000.
c. $90,000.
d. $70,000.
e. $200,000.
3. Which of the following is not a step in creating operating department income statements?
a. Prepare the departmental income statements.
b. Accumulate revenues and direct expenses by department.
c. Allocate indirect expenses across departments.
d. Allocate service department expenses to operating departments.
e. Eliminate the uncontrollable costs for each department.
4. Part AR3 costs the Southwestern Division of Luxon Corporation $26 to make-direct materials are $10, direct labor is $4, variable manufacturing overhead is $9, and fixed manufacturing overhead is $3. Southwestern Division sells Part AR3 to other companies for $30. The Northeastern Division of Luxon Corporation can use Part AR3 in one of its products. The Southwestern Division has enough idle capacity to produce all of the units of Part AR3 that the Northeastern Division would require. What is the lowest transfer price at which the Southwestern Division should be willing to sell Part AR3 to the Northeastern Division?
a. $30
b. $26
c. $23
d. $27
e. $21

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Mixing Baking Packaging Direct costs Sq. ft. of space $21,000 S15,000 $9,000 1,500 1,000 500 Product Pounds Price per Pound Feed 100,000 $0.70 Flour 50,000 2.20 Starch 20,000 1.00