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