Alfred,owner of Hi-Tech Fiberglass Fabricators,Inc. ,is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
Budgeted manufacturing overhead costs:

Services furnished:
By Plant Maintenance (budgeted labor-hours):

By Data Processing (budgeted computer time):

Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

Question

Alfred,owner of Hi-Tech Fiberglass Fabricators,Inc. ,is interested in using the reciprocal allocation method.The following data from operations were collected for analysis:
Budgeted manufacturing overhead costs:

Services furnished:
By Plant Maintenance (budgeted labor-hours):

By Data Processing (budgeted computer time):

Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?

Quizplus · Accepted Answer

The reciprocal allocation method requires solving a system of linear equations, where one equation represents the cost allocated to each department and includes both direct and reciprocal allocations from all other departments. Based on the information provided, the system of equations is:

PM = $70,000 + (4850/4850)PM + (3900/4850)DP
DP = $370,000 + (700/17,100)PM + (3900/17,100)DP

Solving for DP, we get:

DP = $70,000 + (3900/17,100)PM + (3900/17,100)($370,000 + (700/17,100)PM + (3900/17,100)DP)

Simplifying and solving for DP, we get:

DP = $70,000 + (3900/17,100)PM + (270/570)DP

DP = $70,000 + (3900/17,100)PM + (7/30)DP

DP = $70,000 + (3900/17,100)PM + (7/23)DP

Comparing with the given choices, we see that option B matches this equation and is therefore the best choice.