Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:

Required
a. Allocate the service department costs to the two operating departments using the reciprocal method. (Hint: You do not need to use a computer or study the Appendix in this chapter.)
b. Now allocate the service department costs to the two operating departments using the step method, allocating maintenance costs first, followed by processing, and then administration. How does your answer differ from what you obtained in requirement (a)? Why?

Transcribed Image Text:

Using Department Supplying Processing Administration Maintenance Branches Electronic 40% 40% 50% 10% 0 0 50% Processing . Administration.. Maintenance. . . . 0 10% 20% 20%