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The existence of external benefit and external cost leads to misallocation of resources. External cost For example, when drivers are not liable for the health damage of car exhaust, drivers will equate only marginal private cost with marginal benefit. But if drivers are forced to pay for the health damage of car exhaust, their marginal cost will go up by the amount of the external cost.
Accounting & the Cost Allocation Reciprocal Method Formula. A company must allocate the costs of its maintenance people.. Photodisc/Photodisc/Getty Images. One task of accounting is to assign costs properly.olving the Equations. The crux of the reciprocal method is to solve the cost equations simultaneously. When the company solves equations 1 and 2 in terms of maintenance department costs, it finds the allocable costs to be $129,220.