Which statement concerning the step-down method of allocating support department costs is not correct?
A) The method allocates costs one department at a time
B) The cost object in the allocation exercise is the support departments and the operating departments
C) The method recognises that support departments provide support for other support departments
D) The allocation process begins with the support department that provides the least service to the other support departments

Question

Quizplus · Accepted Answer

The step-down method allocates costs one department at a time, recognises that support departments provide support for other support departments, and considers both support departments and operating departments as cost objects. However, the allocation process begins with the support department that provides the most service to the other support departments, not the least. This is because allocating costs from the support department that provides the most service first will result in a more accurate allocation of costs between support departments and operating departments.

Which Statement Concerning the Step-Down Method of Allocating Support Department