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: $\begin{array}{llll}
&&\text { Services Provided By }\
& \underline{\text { Computer}}&& \underline{\text { Cafeteria} }\
\text { Direct costs } & \$ 55,000 & & \$ 35,000 \
\text { Service provided to: } \
\quad \text { Computer department }&-- & & 15 \%\
\text { Cafeteria } & 10 \% & &-- \
\text { Operating department 1 } & 50 \% & & 40 \% \
\text { Operating department 1 } & 40 \% & & 45 \%\
\end{array}$

If the reciprocal method is used, the total costs allocated to the operating departments will be:
A) $61,168
B) $79,250
C) $41,117
D) $90,000

Question

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: $\begin{array}{llll}
&&\text { Services Provided By }\
& \underline{\text { Computer}}&& \underline{\text { Cafeteria} }\
\text { Direct costs } & \$ 55,000 & & \$ 35,000 \
\text { Service provided to: } \
\quad \text { Computer department }&-- & & 15 \%\ 
\text { Cafeteria }  & 10 \% & &--  \
\text { Operating department 1 } & 50 \% & & 40 \% \
\text { Operating department 1 } & 40 \% & & 45 \%\
\end{array}$

If the reciprocal method is used, the total costs allocated to the operating departments will be:
A) $61,168
B) $79,250
C) $41,117
D) $90,000

Quizplus · Accepted Answer

The reciprocal method accounts for the mutual services provided between support departments by solving a set of simultaneous equations. The total costs allocated to the operating departments equal the sum of the initial direct costs of the support departments plus the costs allocated between them, not directly to the operating departments. Given the data, the correct calculation involves setting up equations to reflect the reciprocal services between the Computer and Cafeteria departments, but the provided information is insufficient to directly solve these equations here. However, the total costs allocated to operating departments would logically include all the direct costs of the support departments ($55,000 + $35,000 = $90,000) plus any additional allocations due to reciprocal services, indicating a misunderstanding in the question's setup as it seems to imply direct allocation without showing the detailed calculation steps. The correct answer, based on the total direct costs, would be $90,000 before considering the detailed reciprocal allocation process.

The Managers of Conch, Inc If the Reciprocal Method Is Used, the Total Costs Allocated