When significant differences exist in costs allocated to production departments, cost management should use what method to find a more accurate cost allocation?
A)Reciprocal method.
B)Step method.
C)Direct method.
D)None of the above.

Question

Quizplus · Accepted Answer

When significant differences exist in costs allocated to production departments, the reciprocal method should be used to find a more accurate cost allocation. This method takes into account the services provided between departments and allocates costs accordingly. The step method and direct method do not take into account the services provided between departments, and may not allocate costs accurately in situations with significant cost differences.

When Significant Differences Exist in Costs Allocated to Production Departments