The reciprocal method uses simultaneous equations to allocate the costs incurred by service departments to other departments; allocations are also made between the service departments. This method results in an accurate distribution of costs.Click to see full answer. Hereof, what is the step down method?Unlike direct method, the step method (also known as step down method) allocates the cost of a service department to other service departments as well as to operating departments. The cost allocation under step method is a sequential process.Also Know, what is repeated distribution method? Repeated Distribution Method. Repeated distribution method is a cost accounting technique in which costs of each service department are repeatedly allocated to production departments according to reasonable percentages until the balance left in service departments columns reaches zero. In this manner, how do you allocate costs? If so, a number of possible allocation methods have been used, including: Sales. Costs are apportioned based on the net sales reported by each entity. Cost allocation methods Direct labor. Overhead is applied based on the amount of direct labor consumed by a unit of production. Machine time. Square footage. How do you allocate overhead costs?Compute the overhead allocation rate by dividing total overhead by the number of direct labor hours. For every hour needed to make a product, you need to apply $2.50 worth of overhead to that product.
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