Howard Company has two support departments (S1 and S2) and two producing departments (P1 and P2) . Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
If Howard used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is
Definitions:
Interval Scale
The scale of measurement for a variable if the data demonstrate the properties of ordinal data and the interval between values is expressed in terms of a fixed unit of measure. Interval data are always numeric.
Ratio Scale
The scale of measurement for a variable if the data demonstrate all the properties of interval data and the ratio of two values is meaningful. Ratio data are always numeric.
Nominal Scale
The scale of measurement for a variable when the data are labels or names used to identify an attribute of an element. Nominal data may be nonnumeric or numeric.
Ordinal Scale
A ranking scale used to measure variable where the order of values is significant, but the difference between values is not uniform.
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