ECONOMICS

Detailed explanation-1: -The sequential method (also known as the step-down method), allocates costs to operating departments and other service departments sequentially, but only in one direction.

Detailed explanation-2: -What is the Reciprocal Method? The reciprocal method uses simultaneous equations to allocate the costs incurred by service departments to other departments; allocations are also made between the service departments. This method results in an accurate distribution of costs.

Detailed explanation-3: -This method is also known as algebraic method and simultaneous equations method. Under this method the true cost of the service departments are computed first with the help of simultaneous equations and these are then distributed to producing departments on the basis of given percentage or ratio.

Detailed explanation-4: -The reciprocal method allocates services department costs to operating departments and other service departments. Under the reciprocal cost, the relationship between service departments is recognized and cost is allocated to and from each service department for services provided.