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anderson polyester company is planning to lease computer equipment for its production and finishing departments. currently, the production and finishing departments lease it separately and pay $154,000 and $266,000, respectively, as lease charges. if both the departments lease the equipment jointly, the contract will cost only $380,000. the managers of the finishing department want to know the cost that will be allocated to them under the stand-alone cost-allocation method. what will be the cost allocated to the finishing department?

Respuesta :

The single-rate approach divides the costs of each support department into two pools: one with variable costs and one with fixed costs.

Out of the three methods for allocating support department expenses, which one is the most accurate?

Because it recognizes reciprocal services between service departments, the reciprocal method is the most accurate of the three methods for allocating costs to service departments. Because it requires solving a set of simultaneous linear equations, it is also the most difficult method.

What strategies are available to managers for allocating operating department costs to multiple support departments?

There are three ways to divide costs for the support department: the direct, the reciprocal, and the step-down. The assumptions regarding how services provided by one support department are distributed to other support departments are the primary distinctions between the methods.

Learn more about single-rate approach here:

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