Render Inc. has four support departments (maintenance, power, human resources, and legal) and three operating departments. The support departments provide services to the operating departments as well as to the other support departments. The method of allocating the costs of the support departments that best recognizes the mutual services rendered by support departments to other support departments is the:
A) Direct allocation method.
B) Dual-rate allocation method.
C) Step-down allocation method.
D) Reciprocal allocation method.

Question

Quizplus · Accepted Answer

The reciprocal allocation method best recognizes the mutual services rendered among support departments because it allows for the allocation of costs in a manner that accounts for the interdepartmental services provided between all support departments. This method uses simultaneous equations to allocate costs accurately, reflecting the complexity of interdepartmental services.