Question

The three methods for allocating service department cost to other depertment are ...... A) step down...

The three methods for allocating service department cost to other depertment are ......
A) step down , indirect and reciprocal allocation
B) direct , step up and reciprocal allocation
C) step down, direct and reciprocal allocation
D) step up , indirect and simultaneous equations
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Answer #1

The Three methods to allocate service department costs to other department are:

1. Direct Method: is the simplest of the three. It allocates the cost basis the each department's share of the allocation base. Service used by other departments are ignored.

2. Step Up Method: This allocates costs in a sequential method. The Sequence of allocation starts generally with the service department that has incurred the highest costs.

3. Reciprocal Method: It is the most accurate method. Allocation is done by The relationship between service department is recognised and cost is allocated to and from each service department for service provided.

Answr is B

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