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Hi sir, can you explain under what circumstances would each of the three methods, (1) Direct
(2) Step; and (3) Reciprocal, be the most appropriate ? I can do the calculation but can’t quite understand why and when which method would be use.Calculations in the exam make it clear which method to use.
The direct method issued when there is only one service centre. When there is more than one then it is either reciprocal or step method – reciprocal is the most accurate, but the step method gives a good enough approximation (and is quicker) when the costs in one of the service centres is much bigger than the costs in the others.
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