Unformatted text preview: example, the $1,160,000 in the maintenance department includes the $200,000 of depreciation. Assignment
1. Allocate the service center costs to production centers using the stepdown method, and determine the
relevant total costs. Begin with the maintenance department.
2. To what use would you put this information? Please be specific: what are the next steps you would take
based on this information? ____________________________________________________________________________________________________________
David W. Young • Management Accounting for Managers • Chapter 1
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Appendix. The Reciprocal Method of Cost Allocation
To see how the reciprocal allocation method works, let’s assume that we wish to allocate an overnight mail delivery company’s two service center costs of maintenance and administration to its two production centers: nextday delivery and two-day delivery. Management has decided to allocate maintenance costs on the basis of the
square footage in each department, and administration costs on the basis of the number of hours worked by the
employees in each of their...
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- Spring '14
- ........., Boston University School of Management, Crimson Press Curriculum Center, Professor of Accounting and Control