Question
Requirement 1. Describe the key features of the reciprocal method. The reciprocal allocation method explicitly includes the mutual services provided among all support departments .
Requirement 1. Describe the key features of the reciprocal method.
The reciprocal allocation method explicitly includes the mutual services provided
among all support departments
. Interdepartmental relationships
are
fully incorporated into the support department cost allocations.
Requirement 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method.
Before we can allocate the support departments' costs to the two operating departments using the reciprocal method, let's first determine the linear equations for each support department. Then off-line solve for HR and IS (Information Systems), so that you may complete the allocation of the support departments' costs. (Abbreviations used: HR = human resources; IS = information system.)
|
| Support Departments | Operating Departments |
| ||
|
| HR | Info. Systems | Corporate | Consumer | Total |
| Costs incurred | $75,000 | $230,000 | $996,000 | $486,000 | $1,787,000 |
| Allocation of HR costs | (75,000) |
| 45,000 | 30,000 |
|
| Allocation of Info. Systems costs |
| (230,000) | 184,000 | 46,000 |
|
| Total budgeted costs of operating departments | $0 | $0 | $1,225,000 | $562,000 | $1,787,000 |
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
9781266566899
