The Names of Two Popular Methods for Allocating Service Department

question 76

True/False

The names of two popular methods for allocating service department costs are the direct method and the step-up method.

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Definitions:

Variable Manufacturing Overhead

Variable manufacturing overhead includes costs that fluctuate with production volume, such as utilities and materials used in the production process that are not directly tied to specific units produced.

Fixed Manufacturing Overhead

The consistent, non-variable costs associated with manufacturing, regardless of the production volume.

Direct Materials

Raw materials that are directly used in the production of goods and can be easily traced to the product.

Direct Labour

The workforce directly involved in manufacturing goods or providing services, where their labor can be directly tied to end products.