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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 4
RECIPROCAL METHOD OF SUPPORT DEPARTMENT COST ALLOCATION
Refer to Cornerstone Exercise 7-3. Now assume that Polonchek Company uses the reciprocal method to allocate support department costs.
Required:
1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method.
2. Develop a simultaneous equations system of total costs for the support departments. Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.)
3. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. (Round all allocated costs to the nearest dollar.)
4. What if the allocation ratios in Requirement 1 were rounded to six significant digits rather than four? How would that affect any rounding error in the allocation of costs?
Refer to Cornerstone Exercise 7-3. Now assume that Polonchek Company uses the reciprocal method to allocate support department costs.
Required:
1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method.
2. Develop a simultaneous equations system of total costs for the support departments. Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.)
3. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. (Round all allocated costs to the nearest dollar.)
4. What if the allocation ratios in Requirement 1 were rounded to six significant digits rather than four? How would that affect any rounding error in the allocation of costs?
Explanation
Verified
Verified
Reciprocal method:
In this method all t...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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