Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed


Allocating costs of support departments



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Allocating costs of support departments
The following diagram keyed to the example in the text illustrates that the three methods of allocating support department costs differ only in the way they account for the reciprocal services. Maintenance Information Systems Machining Assembly Direct method – NO reciprocal services recognised.
Step-down method – One-way reciprocal services recognised Maintenance

Information Systems. Reciprocal method – Two-way reciprocal services recognised Maintenance Information Systems. Differences among the three methods allocations increase (1) as the magnitude of the reciprocal services increases and (2) as the differences across operating departments usage of each support service increase.

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