In deciding whether to outsource a service department or not,the cost of the service department should be estimated using the step method of allocation.

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Quizplus · Accepted Answer

The statement is incorrect. While estimating the cost of a service department, various allocation methods can be used such as direct allocation, step-down method or reciprocal method. The choice of method depends on various factors such as the complexity of the cost structure and the nature of the service department. While the reciprocal method is considered the most accurate, it is also the most complex and time-consuming. Therefore, the choice of method should be based on a thorough analysis of the situation.

In Deciding Whether to Outsource a Service Department or Not,the