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What are the three phases of the departmental allocation approach? What happens at each phase?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 5DQ: How does management determine the order in which support department costs are allocated under the...

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What are the three methods of departmental cost allocation? Explain how they differ, which is themost preferred and why
Which of the following principles should be applied when the step method of allocating service department costs is used? The sequence of allocation among departments should be randomly selected. The sequence of allocation among departments should proceed from the largest department as measured by total assets to the smallest. The sequence of allocation among departments should proceed from the largest provider of interdepartmental services to the smallest. All possible sequences of service department allocations should be computed. The sequence that provides the largest allocation of service costs should then be selected.
How does management determine the order in which support department costs are allocated under the sequential method?
Explain briefly the main differences between the direct, step-down, and reciprocal-services methods of service department cost allocation.
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A-Using the reciprocal method, what amount of Data Center Department cost will be allocated to the Warehouse Department B-How much does budgeted cost allocated for Department Books? C-How much does budgeted cost allocated for Department Music?
What is the most important information to include in the evaluation of the performance of the divisions?
Using the direct method, what amount of Warehouse Department costs will be allocated to Department Books?
In each blank next to the following types of indirect expenses and service department expenses, place the identifying letter of the best allocation basis to use to distribute it to the departments indicated.
What are support departments, and why are their costs allocated to other departments? What process is used to allocate support department costs?
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