(Appendix 4B)The step-down method requires establishing an order of allocation before service department costs can be allocated to operating departments.

Question

Quizplus · Accepted Answer

The step-down method does require establishing an order of allocation before service department costs can be allocated to operating departments. This is because the method involves allocating costs from service departments to other service departments before then allocating costs from all service departments to operating departments. The order in which the service departments are allocated affects the amount of costs allocated to each department.

(Appendix 4B)The Step-Down Method Requires Establishing an Order of Allocation