Eastside Hospital has two service departments (Patient Records and Accounting) and two "production" departments (Internal Medicine and Surgery). Which of the following allocations would likely take place under the reciprocal-services method of cost allocation?
A) Allocation of Accounting cost to Patient Records.
B) Allocation of Patient Records cost to Internal Medicine.
C) Allocation of Surgery cost to Accounting.
D) Allocation of Internal Medicine cost to Surgery.
E) Both Allocation of Accounting cost to Patient Records and Allocation of Patient Records cost to Internal Medicine.

Question

Quizplus · Accepted Answer

Under the reciprocal-services method, costs are allocated between service departments and production departments based on the usage of services between departments. Therefore, both allocation of Accounting cost to Patient Records and allocation of Patient Records cost to Internal Medicine would likely take place, since these two departments would reciprocally use each other's services.

Eastside Hospital Has Two Service Departments (Patient Records and Accounting)