Allocation of service department costs to producing departments is the most complex of the allocation phase of departmental cost allocation because of the likely presence of:
A)Manager bias.
B)Formula distracters.
C)Repetitive steps.
D)Reciprocal flows.
E)Non-value adding activities.

Question

Quizplus · Accepted Answer

Reciprocal flows refer to situations where two or more service departments provide services to each other as well as to producing departments. This creates a complex web of cost allocations, as costs must be allocated both within and between service departments before they can be allocated to producing departments. This makes the allocation of service department costs to producing departments the most complex of the allocation phase. Manager bias, formula distracters, repetitive steps, and non-value adding activities may also be present, but they are not the primary reason for the complexity of this allocation.

Allocation of Service Department Costs to Producing Departments Is the Most