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:

Total Variable Costs

The overall expenses that change in proportion to the activity of a business, such as production volume or units of service delivered.

Total Fixed Costs

The sum of all costs that remain constant regardless of the level of production or output within a specific period.

Total Variable Costs

The sum of all costs that vary directly with the level of production or output, excluding fixed costs.

Total Costs

Total costs encompass the sum of all expenses incurred by a business in the production and sale of goods or services.