Which method allocates costs by explicitly including the mutual services rendered among all support departments?
A)the direct allocation method
B)the interdepartmental method
C)the reciprocal allocation method
D)the step-down method
E)the incremental method

Question

Quizplus · Accepted Answer

The reciprocal allocation method allocates costs by taking into account the mutual services rendered among all support departments. This method is more accurate than the direct allocation method, which only allocates costs based on direct usage, and the incremental method, which only considers the change in cost from adding a new support department. The step-down method is also more accurate than the direct allocation method, but it only accounts for the mutual services between the support departments and not all departments. The interdepartmental method is not a commonly used allocation method. Therefore, the best choice is C, the reciprocal allocation method.

Which Method Allocates Costs by Explicitly Including the Mutual Services