Question

Because this allocation method recognizes that service departments often provide each other with interdepartmental service, it is theoretically considered to be the most accurate method for allocating service department costs to production departments. This method is:

Answer 1

Answer: Reciprocal method

Explanation:

Under reciprocal method the cost incurred is allocated to other departments using some equations. Using this method the costs can be accurately distributed. It is also a complicated method of allocating the costs. The service department costs are allocated to and from other service departments.

The overhead costs are allocated based on the objective method. The service department costs can be allocated to the production departments and other departments. The efficiency of the service departments can also be identified.