Which of the Following Principles Should Be Applied When the Step

question 11

Multiple Choice

Which of the following principles should be applied when the step method of allocating service department costs is used?

• A)The sequence of allocation among departments should be randomly selected.
• B)The sequence of allocation among departments should proceed from the largest department as measured by total assets to the smallest.
• C)The sequence of allocation among departments should proceed from the largest provider of interdepartmental services to the smallest.
• D)All possible sequences of service department allocations should be computed. The sequence that provides the largest allocation of service costs should then be selected.

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Definitions:

Consolidated Income Statements

A financial statement that aggregates the income statements of a parent company and its subsidiaries to show the total earnings and financial performance of the entire group.

Protectionism Law

Legislation intended to protect domestic industries from foreign competition through tariffs, quotas, or other restrictions.

Importation

The process of bringing goods or services into a country from abroad for the purpose of selling.

Indirect Quote

Exchange rate expression showing the amount of foreign currency required to buy or sell one unit of the home currency.