Trackings Corporation has two service departments (Maintenance and Human Resources)and three production departments (Machining,Assembly,and Finishing).Maintenance is the larger service department and Assembly is the largest production department.The two service departments service each other as well as the three producing departments.On the basis of this information,which of the following cost allocations would not occur under the direct method?

Question

Quizplus · Accepted Answer

Allocations "A" and "C" would not occur under the direct method because the direct method only allocates service department costs to the production departments, not to the other service department. Therefore, Machining cost would be allocated to Assembly (choice A) and Human Resources cost would be allocated to Finishing (choice D) under the direct method. However, Maintenance cost would not be allocated to Human Resources (choice C) and Finishing cost would not be allocated to Maintenance (choice B).

Trackings Corporation Has Two Service Departments (Maintenance and Human Resources)and