Methods of allocating service costs, Cost Accounting

Methods of Allocating Service Costs

Direct Method

The service costs are merely allocated to the production department according to the usage of the services given.

Step-wise Method

Several of the costs of the reciprocal services will be recognized though only to several extent. The steps followed involved:

1. Select one of the service departments and allocate its costs to all the other departments including the other service departments. Generally the basis of choosing which service department to start along with is the service department such provides services to the greatest number of another department.

2. Another service department is selected and its net costs allocated the remaining departments excluding the first service departments.

3. Repeat the process till the entire service department costs have been allocated to the production departments.

Reciprocal Method

This method totally considers all reciprocal services. It is the main precise in technically finished method. These methods employ the following techniques as:

i. Simultaneous Equation

ii. Matrix Algebra

Posted Date: 2/5/2013 7:53:12 AM | Location : United States







Related Discussions:- Methods of allocating service costs, Assignment Help, Ask Question on Methods of allocating service costs, Get Answer, Expert's Help, Methods of allocating service costs Discussions

Write discussion on Methods of allocating service costs
Your posts are moderated
Related Questions
fixed expenses are incurred equally in the two half year periods,calculate

maintenance costs at a hospital

how does idle capacity effect cost behavior patterns and factory overhead application methods

Classification of Labour Costs This can be classified into like: a) Indirect or Direct cost b) Variable or Fixed cost c) Non controllable and controllable cost a)

The Gladys Corporation buys office equipment costing $426,000 on May 12, 2013. In 2015, new and improved models of the equipment make it obsolete, and Gladys sells the old equipme

Period Costs Some terms are difficult to define. In one school of thought, period costs are the any costs that are not product costs. But, such a description is a stretch, beca

diff between cost estimation and cost accounting

#question.ABC Corportaion produces and sell two products. In the most recent month, Product 123 had sales of $33,000 and variable expenses of $15,840. Product 245 had sales of $42,


These are losses on account of uncollectable debts. While the amount due from debtors is irrecoverable, it is termed as bad debts. Bad debts, being loss are closed through transfer