Allocate the cost of the service departments to the operating departments using the reciprocal method.

Leave a Comment / Accounting / By

Allocate the cost of the service departments to the operating departments using the reciprocal method.

Allocate the cost of the service departments to the operating departments using the reciprocal method.
Allocate the cost of the service departments to the operating departments using the reciprocal method.
Assessment 3 Part 4: Comparison of Allocation Methods
Scenario:
Liberty Company has two service departments: administration and accounting, and two operating departments: domestic and international. Administration costs are allocated on the basis of employees and accounting costs are allocated on the basis of number of transactions. A summary of Liberty operations follows:
Administration   Accounting   Domestic   International
Employees               —             25             45              180
Transactions         27,500            —      22,000         88,000
Department Direct Costs     $396,000    $158,400 $1,029,600     $3,960,000
REQUIRED
1. Allocate the cost of the service departments to the operating departments using the direct method.
2. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.
3. Allocate the cost of the service departments to the operating departments using the reciprocal method.
4. Explain the results of your analysis.

Place Your Order Here!

Leave a Comment

Your email address will not be published. Required fields are marked *