Use the following information for the next 4 questions. The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data:
-If the reciprocal method is used, the equation representing the total cost of the cafeteria is
A) Cafeteria = $35,000
B) Cafeteria = $35,000 + (0.15 × computer cost)
C) Cafeteria = $35,000 + (0.10 × computer cost)
D) Cafeteria = $35,000 + 0.10 × ($55,000 + 0.10 × computer costs)

Question

Use the following information for the next 4 questions. The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data: 
-If the reciprocal method is used, the equation representing the total cost of the cafeteria is
A) Cafeteria = $35,000 
B) Cafeteria = $35,000 + (0.15 × computer cost) 
C) Cafeteria = $35,000 + (0.10 × computer cost) 
D) Cafeteria = $35,000 + 0.10 × ($55,000 + 0.10 × computer costs)

Quizplus · Accepted Answer

The reciprocal method allocates costs based on the reciprocal of the cost driver rate. In this case, the cost driver is the computer cost. The reciprocal of the cost driver rate is 1/0.10 = 10. The total cost of the cafeteria is $35,000 + (0.10 × computer cost).

Use the Following Information for the Next 4 Questions