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Calculation of Total Costs of Reciprocally Conditioned Service Departments – Allocation Methods
Last modified: 2011-10-03
Abstract
This paper deals with cost assignment for indirect costs, as part of company's internal accounting structure. More often than not, there is a considerable amount of activities exchanged between various service departments, which provide services reciprocally, and not only for production departments. Consequently, when such interactions occur, it is necessary to calculate the total costs of these service departments, i.e. to determine their respective overheads. Based on an actual commercial accounting software application, a variant of the method of reciprocal allocation, namely the method of repeated addition with inclusion, is illustrated, in order to better demonstrate the theoretical and practical aspects of inter-service cost allocation
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