Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 4

What does the term reciprocal mean in the context of departmental cost allocation?

Step 1 of 3

Departmental Cost Allocation:

Departmental cost allocation refers to the allocation of overhead expenses in the department. This approach recognizes that manufacturing operation is divided into production department and support department.

Hence, cost allocation is used to allocate indirect expense between production department and support department.