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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Cost Allocation: Reciprocal Method
Refer to the data for University Printers in Exercise 11-24.
Required
Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.)
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Cost accounting system
This is a system designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.
Cost allocation of service departments
Service departments like human resource, administration, accounts, IT etc. render their services to other user departments which may include production or other service departments also. The costs of these service departments also need to be allocated among other user departments for product and departmental costing purposes. There are different methods used for service costs allocation like direct method, step method and reciprocal method.
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