Answer the following question(s)using the information below.Joanne, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
Budgeted manufacturing overhead costs:
Services furnished:

-What is the complete reciprocated cost of the Personnel Department?
A)$92,500
B)$93,803
C)$80,000
D)$105,000
E)$165,634

Question

Answer the following question(s)using the information below.Joanne, owner of Automated Fabric, Inc., is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
Budgeted manufacturing overhead costs:
  Services furnished:
 
-What is the complete reciprocated cost of the Personnel Department?
A)$92,500 
B)$93,803 
C)$80,000 
D)$105,000 
E)$165,634

Quizplus · Accepted Answer

The reciprocal allocation method involves multiple iterations of allocations until a stable result is obtained. In the first iteration, we allocate the service department costs based on the direct allocation method. This results in the following allocations:

Personnel Department: $80,000 + ($60,000 ÷ 2) = $110,000
Maintenance Department: $50,000 + ($30,000 ÷ 2) + ($25,000 ÷ 2) = $72,500
Total allocated costs to production departments = $182,500

In the second iteration, we use the allocated costs from the first iteration to allocate the service department costs again. This results in the following allocations:

Personnel Department: $80,000 + ($72,500 ÷ 2) = $116,250
Maintenance Department: $50,000 + ($30,000 ÷ 2) + ($31,875 ÷ 2) = $66,875
Total allocated costs to production departments = $199,625

In the third (and final) iteration, we use the allocated costs from the second iteration to allocate the service department costs again. This results in the following allocations:

Personnel Department: $80,000 + ($78,281 ÷ 2) = $119,141
Maintenance Department: $50,000 + ($29,390 ÷ 2) + ($34,868 ÷ 2) = $67,629
Total allocated costs to production departments = $201,770

Therefore, the complete reciprocated cost of the Personnel Department is $119,141.

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