The following is a system of simultaneous linear equations to allocate costs using the reciprocal method....

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The following is a system of simultaneous linear equations to allocate costs using the reciprocal method....

The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service departments in Westmoreland Company.

Department	Direct Costs		Label
Subassemblies	$	561,000	P1
Final assembly		786,000	P2
Marketing		296,000	P3
Building occupancy		96,000	S1
Research & development		131,000	S2
Supervision		56,000	S3

Use of services by other departments is as follows.

	User Departments
Service Cost Center	Sub-assemblies	Final Assembly	Marketing	Building Occupancy	R&D	Supervision
Building occupancy	0.30	0.25	0.20	---	0.15	0.10
R&D	0.50	0.50	---	---	---	---
Supervision	0.30	0.30	0.10	0.20	0.10	---

The equation for department S1 (building occupancy) is:

Multiple Choice

S1 = 0.20S3.
S1 = $96,000 + 1.00S3.
S1 = $96,000 + 0.20S3.
S1 = $96,000 + 0.80S2 + 0.20S3.

business accounting

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Answer 1

Answer #1

The equation for department S1 (building occupancy) is:

Its own cost = $96000
Department S3 's (Supervision) cost allocated to it = 0.20*S3

therefore department S1 cost would be

S1 =$96000+0.20 S3

Correct Option: THIRD

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Answer 2

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