Support Cost Allocation Using Reciprocal Method (Managerial Accounting Series)
In this managerial accounting tutorial we discuss allocating support department costs to revenue producing departments using the reciprocal method. The reciprocal method basically shows that the support departments reciprocate support services which is why we use the reciprocal method in this business example. We will use substitution algebra to allocate costs finally to the revenue producing departments and clear out cost balances in the support departments.
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