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.

Question

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.

Quizplus · Accepted Answer

The reciprocal method is often considered difficult to understand because it involves solving simultaneous equations to allocate costs, which can be complex for managers.

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