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There are three methods of service department allocation are in general use . 1- Direct method Ther direct method is the simplest the direct method allocates service department costs directly to the producing departments without regard for services rendered by service departments to each other. service department costs are allocated to production departments based on an allocation base appropriate to each esrvice department's function. 2- The step or step-down method Allocates some of costs of services rendered by service dapartments of each other. The step method derives its name from the procedure involved : the service departments are allocated in order, from the one that provides the most service to other service department down to the one that provides the least . 3- the reciprocal method Is the most complex and the most theoretically sound of the three methods. it is also known as the simultaneous solution method, cross allocation method, matrix allocation method,or double distribution method. The reciprocal method recognizes services rendered by all service departments to each other. BY AMIR KAMAL MASSOUD

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Why are service cost center overheads reapportioned to production cost centers?

Service cost center overheads are reapportioned to production cost centers to ensure that all costs associated with producing goods are accurately reflected in the total cost of production. This process helps in assigning the true cost of resources consumed by production activities, allowing for more accurate pricing, budgeting, and financial analysis. By redistributing these overheads, organizations can better understand the profitability of their products and make informed managerial decisions. Ultimately, it enhances the overall cost accuracy and efficiency within the organization.


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