Downtown 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?

Question

Quizplus · Accepted Answer

The reciprocal-services method of cost allocation recognizes that service departments may provide services to each other as well as to production departments. Therefore, allocations under this method would include both service to service department allocations (like Accounting costs to Patient Records) and service to production department allocations (like Patient Records costs to Internal Medicine). Options A and B are examples of these types of allocations, making E the correct choice.

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