“The reciprocal method is the most appropriate method of support department cost allocation as it takes...

“The reciprocal method is the most appropriate method of support department cost allocation as it takes into account all service flows between departments.” Do you agree? Explain your answer.

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ekkarill92 answered 1 year ago

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Support Department Cost Allocation Using the Algebraic or Reciprocal Method The algebraic or reciprocal method takes...

Support Department Cost Allocation Using the Algebraic or Reciprocal Method The algebraic or reciprocal method takes full account of support department reciprocity. This method requires the solution of a system of simultaneous equations to determine the total support department costs to be allocated. In practice, relatively few companies use the reciprocal method. Let's use Anders Company, as an example. Anders has two producing departments - Cutting and Sewing - and two support departments - Maintenance and General Factory (GF). Anders...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $140,000 $330,000 $114,200 $95,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $170,500 $360,000 $114,250 $94,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $160,000 $360,000 $114,800 $95,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and...

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $160,000 $330,000 $114,800 $94,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $266,000. The total cost of the Cafeteria Department is $638,000. The number of employees and the square footage in...

Support department cost allocation—reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting...

Support department cost allocation—reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: Maintenance Department Security Department Cutting Department Sewing Department Machine hours 800 2,000 6,800 11,200 Asset...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $257,000. The total cost of the Cafeteria Department is $631,000. The number of employees and the square footage in...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $261,000. The total cost of the Cafeteria Department is $397,000. The number of employees and the square footage in...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s...

Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $240,000. The total cost of the Cafeteria Department is $898,000. The number of employees and the square footage in...

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