The human resource department in a manufacturing company would be considered a service department.
One reason to allocate service department costs to user departments is to encourage the user departments to monitor their use of the service department costs.
The selection of an allocation base in the direct method is easier than the selection of an allocation base in the reciprocal method.
With the reciprocal method, the total service department costs less the direct costs of the service department equals the cost allocated to the service department.
In deciding whether to outsource a service department or not, the cost of the service department should be estimated using the step method of allocation.
Which of the following is the least practical reason for allocating service department costs to user departments?
To provide the best possible service to users.
A management purpose for allocating joint costs of a processing center to the various products produced is to
establish inventory values for unsold units.
Which of the following service departments could logically use space occupied (square footage) to allocate its costs to user departments?