Under the Reciprocal Method of Allocating Support Department Costs to Production

question 143

True/False

Under the reciprocal method of allocating support department costs to production departments using ABC, any inter-support-department usages are ignored.

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Definitions:

Activity-Based Costing

A costing methodology that assigns costs to products and services based on the activities required to produce them.

Overhead Costs

Indirect costs of running a business that are not directly attributable to a specific product or service, such as rent, utilities, and administrative expenses.

Cost Drivers

Factors that cause the cost of a product or service to change.

Single Plantwide Overhead Rate

A method in cost accounting where a single rate is used to allocate all of a plant's manufacturing overhead costs to its products.