Chapter 11, Problem 55P

Cost Allocation: Step and Reciprocal Methods

Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering. Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:

Required

Allocate the service department costs to the two operating departments using the reciprocal method. (Hint: You do not need to use a computer or study the Appendix in this chapter.)