The Step-Down Method of Allocation Improves the Direct Method By

question 9

Multiple Choice

The step-down method of allocation improves the direct method by:

• A)Considering the reciprocity in consumption partially.
• B)Simplifying the allocation approach.
• C)Allocating more of the total cost of the service activity.
• D)Using a statistical approach to allocation.
• E)None of the above.

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Definitions:

Variable Costing

A method of accounting that encompasses just the variable costs associated with manufacturing—such as direct materials, direct labor, and variable manufacturing overhead—as part of the product costs.

Unit Product Cost

An assessment of the total expense incurred to produce a single unit, incorporating direct costs like labor and materials, as well as indirect costs.

Year 1

A term typically used to refer to the first year of operation or the initial year in a specific timeframe.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) when calculating the cost of goods sold.