A company has several service departments that provide differing amounts of service to each other and to the company's operating departments. Which of the following statements is true?
A)The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.
B)The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
C)The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
D)The direct method is more accurate than the step-down method when service departments provide services to each other.

Question

Quizplus · Accepted Answer

The direct method allocates service department costs directly to operating departments without considering inter-service department services, so the order of allocation does not affect the total cost allocated to each operating department.

A Company Has Several Service Departments That Provide Differing Amounts