Consider the Following Statements About the Direct Method of Service

question 74

Multiple Choice

Consider the following statements about the direct method of service department cost allocation:
I. Under the direct method, all service department costs are eventually allocated to production departments.
II. The order in which service department costs are allocated to production departments is important.
III. Once a service department's costs have been allocated, no costs are re-circulated back to that department.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) I and II.
• D) I and III.
• E) I, II, and III.

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