Reciprocal Cost Allocations for Many Support Departments Using Spreadsheet Matrix Functions
Dennis F. Togo · 2016
The reciprocal method for allocating costs of support departments is the only method that recognizes all services provided to other departments. Yet, even as the number of support departments and their costs increase, the adoption of the reciprocal method has been hampered since it requires solving simultaneous equations for reciprocated costs of each support department. Matrix functions in spreadsheets will solve for reciprocated costs of many support departments. The Sasha Case illustrates the use of matrices to model services among support and operating departments, to solve simultaneous equations for the reciprocated costs of support departments, and to allocate the reciprocated costs to other departments.