Homework Answers
Reciprocal method :
Let the total cost for Administration be "X" and total cost for Accounting be "Y"
| Administration | Accounting | Domestic | International | Total | |
| Number of employees | 0 | 22 | 48 | 30 | 100 |
| 22/100 = .22 | 48/100 =.48 | 30/100 =.30 | |||
| Number of transactions | 33000 | 0 | 22000 | 88000 | 143000 |
| 33000/143000=.23077 | 0 | 22000/143000=.15385 | 88000/143000=.61538 |
Administration department :
Total cost =Direct cost + allocation from Accounting department
X = 363000 + [.23077* Y] [Equation 1]
Accounting department
Total cost =Direct cost + allocation from Administration department
Y= 149000+ [.22* X]
Putting the value from equation 1
Y = 149000+ [.22* {363000+.23077 Y} ]
=149000+ [79860+ .05077 Y ]
= 228860 + .05077Y
Y-.05077Y = 228860
.94923 Y = 228860
Y= 241101
Putting the value in equation 1
X = 363000 + [.23077* Y]
X = 363000+ [.23077*241101]
= 363000+ 55639
= 418639
Total cost for Administration = 418639
Total cost for Accounting = 241101
| From | To | |||
| Administration | Accounting | Domestic | International | |
| Department cost | 363000 | 149000 |
935000 |
3520000 |
| Administration allocation | (418639) | 418639*.22=92101 | 418639*.48=200947 | 418639*.30=125591 |
| Accounting allocation | 241101*.23077=55639 | (241101) | 241101*.15385=37093 | 241101*.61538= 148369 |
| Total cost | 0 | 0 | 1173040 | 3793960 |
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