Boswell Consulting Has Two Service Departments, S1 and S2, and Three

question 70

Essay

Boswell Consulting has two service departments, S1 and S2, and three production departments, P1, P2, and P3. Data for a recent month follow:

Required:
(a) Determine the allocations to the production departments when the reciprocal method is used.
(b) Briefly describe why the reciprocal method is theoretically preferable to other methods of allocation.

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Definitions:

Economizing Problem

The fundamental economic issue of meeting people's virtually unlimited wants with scarce resources, requiring choices and priorities in resource allocation.

Unlimited Time

An indefinite duration without a specified end point or limit.

Normative Economic

An aspect of economics that examines values or judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal.