This means service department costs are allocated to and from the other service departments. Given advances in computing power, the reciprocal method would seem to be accessible to many companies that are not using it. Presumably, these companies believe that the benefits obtained from more accurate service department cost allocations do not justify the costs required to implement the reciprocal method. This process continues through multiple rounds until the balance in S1 is immaterial. We stopped at the sixth round, where the balance of S1 was $0.0003 (cell C23).

  1. The custodial services department allocates its costs based on square footage.
  2. Determine the total cost of support departments so that the total cost reflects interaction with other support departments.
  3. Later in the story, pause to find out if the students know the word “cocoon”.
  4. The reciprocal of a decimal is the same as it is for a number defined by one over the number.
  5. Of these methods, the reciprocal method is the most complex, but it is also the most accurate.

Finally, after finishing the story, guide the students through the summarizing process. Help them identify the main idea and key points with the following questions. The reciprocal of a fraction can be determined by interchanging the values of the numerator and denominator. The resultant number obtained from both methods will result in the same value. The most important application of reciprocal is used in division operation for fractions.

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Hence, it returns its original value, if we take the reciprocal of an inverted number. In this article, we are going to learn the definition of reciprocal, how to find the reciprocal of numbers, fractions and decimals with many examples. In Maths, reciprocal is simply defined as the inverse of a value or a number. Now, if we multiply a number by its reciprocal, it gives a value equal to 1. With the iterative calculation option enabled, Excel will allow circular references in formulas. A circular reference is when the formula in a cell refers to other cells that in turn refer to the original cell.

For this example, the two service departments of human resources and custodial services provide services to each other as well as to the production departments of assembly and painting. The situation would be different if one service department consumed a lot of a second service department, and that first service department primarily served a single operating department. Determine the total cost of support departments so that the total cost reflects interaction with other support departments. In the example, the human resources (HR) department receives 20 percent of data processing (DP) services, and data processing receives 10 percent of human resources output. In the consecutive period, the HR costs were $160,000 and DP costs were $250,000.

10.4 The Reciprocal Method

The reciprocal method fully recognizes the other service departments by allowing reallocations back to each service department. As such, it’s more difficult to calculate but also more accurate than the other methods. The allocation of service department costs is incomplete if the method used for cost allocation ignores or does not give full recognition to interdepartmental services. Interdepartmental services are services that two or more service departments provide to each other. For example, consider a case where service department A provides service to service department B, and in turn, department B provides service to department A.

Painting occupies 800 square feet, accounting for 19 percent of the square footage used to allocate costs. Human resources occupies 400 square feet, accounting for 10 percent of the square footage used to allocate costs. Since maintenance costs are allocated to
administration and administration cost is allocated to maintenance
— things get interesting.

It is also expressed by the number raised to the power of negative one and can be found for fractions and decimal numbers too. You find the inverse of a fraction by exchanging the numerator (top number) with the denominator (bottom number) – taking the reciprocal of the fraction. Additionally, our reciprocal calculator will show you the fraction in its simplified form. A reciprocal in math is one divided by the number in question (also known as the multiplicative inverse).

What is the reciprocal of 5?

In a simple example with two service departments and two operating departments, only four simultaneous equations are needed and can be easily solved by hand. When more than two service departments are involved, accounting textbooks recommend the use of simultaneous equations, matrix algebra, and a computer to solve the equations. Unfortunately, students and financial managers find the use of matrix algebra to be quite a challenge. A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments. Total maintenance cost can be calculated as
$8,000 department cost + $1,429 (7,145 x 20%) allocated from
administration for a total of $9,429.

Reciprocal of a Decimal

The $100 direct cost of S1 is allocated using 500 direct labor hours, with 100, 250, and 150 direct labor hours consumed by S2, P1, and P2, respectively. S2’s direct cost of $40 is allocated using 1,000 machine hours, with 500, 100, and 400 machine hours consumed by S1, P1, and P2, respectively (see Figure 1). The direct method allocates costs to the operating reciprocal method departments directly, with no allocations to the other service departments. The method is easy to implement, but it ignores the fact that other service departments require services from each other, so it’s less accurate. Fully reciprocated custodial services costs to be allocated to production departments, as calculated above, equal $90,679.

It is also the most complicated method, because it requires solving a set of simultaneous linear equations. The Reciprocal Method is the most accurate and comprehensive of the service department cost allocation methods, but it’s also the most complex. The basic premise is to account for the interaction between service departments and not simply ignore the services they provide to each other. In the reciprocal method, the relationship between the service departments is recognized.

When studying a non-fiction text, students should preview the text’s title, subheadings, bold print, and visuals such as maps, tables, and diagrams. When studying a work of fiction, students should look at the book’s cover, title, and illustrations. In both instances, the students should look for clues that help them predict the author’s purpose and the topic of the text.

You will need to determine the TOTAL cost
being allocated to both the Administration and Maintenance
Departments first. The human resources department allocates its costs based on the number of employees. Assembly has 10 employees, accounting for 67 percent of the employees used to allocate costs. Painting has three employees, accounting for 20 percent of the employees used to allocate costs.

Normally, Excel can’t automatically calculate a formula like that because it would by default keep recalculating indefinitely—almost like a basic go-to loop in programming that never ends. The iterative calculation option lets you put a limit on the number of times Excel recalculates the formula. Reciprocal teaching is an instructional technique aimed at developing reading comprehension skills by gradually empowering the students to take on the role of the teacher. Reciprocal teaching makes students active participants in the lesson. It also helps students transition from guided to independent readers and reinforces strategies for comprehending the meaning of a text. Although the complexity issue could be overcome by use of computers, there is no evidence that computers have made the reciprocal method more popular.