The Hearts and Hands Clinic has two service departments (Human Resources and Information Systems)and two "production" departments (In-patient Treatment and Out-patient Treatment).The service departments service the "production" departments as well as each other,and studies have shown that Information Systems provides the greater amount of service.Which of the following allocations would not occur if Hearts uses the step-down method of cost allocation?

Question

Quizplus · Accepted Answer

With the step-down method of cost allocation, the costs of service departments are allocated first to other service departments, and then to production departments based on the amount of service received.

Option A is possible, as Information Systems can provide service to Human Resources. 
Option B is possible, as Human Resources can also provide service to Information Systems. 
Option C is possible, as Human Resources can provide service to In-patient Treatment.

However, Option D is not possible because In-patient Treatment is a production department and cannot provide service to another production department. Therefore, Option E is also not possible as it includes Option D.

The Hearts and Hands Clinic Has Two Service Departments (Human