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Are large or small companies more likely to use the reciprocal services method to allocate support...

Are large or small companies more likely to use the reciprocal services method to allocate support department costs to production departments? Why?

What is the main difference between the physical units and weighted average methods of joint cost allocation?

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Answer #1

Ans 1

There are many methods of allocating service department cost to production department for example direct method, step up method and reciprocal method. However, companies prefer reciprocal method because it recognises interdepartmental services fully and better way of allocating service department costs to other departments.

Ans 2

The chief difference between physical unit method and weighted average methods of joint cost allocation is the difference in weight given to each class of products. In physical unit method, all units have equal weight. However, in weighted average method, different weights are given to different products, on the basis of their complexity in production.

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