3310solmod21 - Module 21 Answers 10-2 The essential...

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Module 21 Answers 10-2. The essential difference is the allocation of costs among service departments. The direct method makes no inter-service-department allocation, the step method makes a partial inter-service-department allocation, while the reciprocal solution method fully recognizes inter-service-department activities. All three methods allocate costs to the production departments based on the production department’s relative use. 10-3. Allocations usually begin from the service department that has provided the greatest proportion of its services to other service departments, or that services the greatest number of other service departments. This criterion is used to minimize the unrecognized portion of reciprocal service department costs. (Recall that the amount of service received by the first department to allocate in the step allocation sequence is ignored.) Another criterion employed is the amount of cost incurred by the service department. As with other allocation problems, it is a combination of the diversity
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This note was uploaded on 11/13/2008 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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3310solmod21 - Module 21 Answers 10-2 The essential...

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