Support department costs are accounted for in which one of the following ways?
A)They are allocated directly to units of product.
B)They are allocated to producing departments and then allocated to units of product.
C)They are allocated to units of product and then allocated to the producing departments.
D)They are expensed as incurred.

Question

Quizplus · Accepted Answer

Support department costs are typically indirect and cannot be traced directly to a unit of product. As a result, they are allocated to producing departments and then allocated to units of product. This allocation method is called the two-stage allocation method. Option A is incorrect because this method assumes that the costs are directly traced to the units of product. Option C is incorrect because it assumes that the costs are first allocated to units of product and then allocated to producing departments. Option D is incorrect because it assumes that the costs are expensed as incurred, which is not an appropriate method of cost allocation for support department costs.

Support Department Costs Are Accounted for in Which One of the Following