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Unformatted text preview: iprocal method is contained in the Appendix at the end of this chapter. As the appendix
demonstrates, because of the simultaneous equations, the method is quite complex. When the number of service
centers (and hence simultaneous equations) exceeds three, a human has some considerable difficulty using the
method. It is relatively easy for a computer to solve the equations, however. Because of the method’s precision, and
the increasing availability of the necessary software, the reciprocal method is preferred by the Cost Accounting
Standards Board (CASB).
Despite the CASB’s preference for the reciprocal method, many organizations find the stepdown method has
about the right balance between accuracy and ease of use. We thus will use it here for illustrative purposes.
Choosing a Service Center Sequence. When the stepdown method is used, the sequence followed in allocating the service centers can have an impact on the costs in each production center. The sequence will not affect total
costs, however, which will remain the same under al...
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This document was uploaded on 03/30/2014.
- Spring '14