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A202 Chapter 16
Exam 2
19
Accounting
Undergraduate 2
11/12/2011

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Term
direct method
Definition
an allocation procedure that ignores the relationship amoung support activities and focuses instead on the relationship between support and line activities
Term
dual rate allocations
Definition
a procedure that employs two separate drivers to allocate fixed and variable costs in a cost pool
Term
line activity
Definition
an activity that is directly related to making and selling the firm's products and services
Term
reciprocal method
Definition
an allocation procedure that fully accounts for the relationship amoung support activities
Term
reciprocity in consumption
Definition
a consumption pattern in which two departments provide services to each other
Term
self consumption
Definition
a support department consuming its own output
Term
sequential allocation
Definition
also known as step down method
Term
step down method
Definition
an allocation prcedure taht partially accounts for the relationship amount support activities
Term
support activity
Definition
an activity that is not a line activity. these activities help the firm execute the line activity
Term
two factor allocation
Definition
see dual rate allocation
Term
why is it import to account for reciprocity amoung support activities
Definition
1 it increases the accuracy of cost estimates
2 allocating the cost of support departments helps line managers become aware of teh costs of the services they consume
Term
three methods to allocate support cost
Definition
1 direct
2 step down
3 reciprocal
Term
when computing percentages for allocating cost we ignore...
Definition
self consumption
Term
In the direct method do we allocate cost to other support lines
Definition
no
Term
using the direct method we ignore....
Definition
consumption used by other support lines
Term
steps to step down method
Definition
1 rank ordering support activities
2 start by allocating highest ranked cost to lower ranked cost
Term
the key step to performing a step down method
Definition
is to rank the support cost pools according to some criterion
Term
the reciprocal method is conceptually the most appealing because....
Definition
it takes into account all of the reciprocity in consumption
Term
although recip is the most appealing it is also the most....
Definition
complex
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