Maile-Ann Company: A Matrix Approach To Reciprocated Support Department Cost Allocations

Abstract

The reciprocal method for allocating support department costs has been shown to be better than the direct and step-down methods.  In addition, a matrix approach for the reciprocal method has been presented often in academic journals.  Yet, the instructional use of spreadsheet matrix functions for reciprocal cost allocations has been limited as many authors continue to present two-department simultaneous equations solved by algebraic substitutions.  The Maile-Ann Company presents an intuitive matrix approach to allocating reciprocated costs of many support departments.  The case converts commonly used algebraic expressions of support department reciprocated costs into an equivalent matrix relationship.  Spreadsheet matrix functions compute each support department’s reciprocated costs and allocate them to user departments.