The Step-Down Method of Service Department Cost Allocation Ignores Interdepartmental

question 200

True/False

The step-down method of service department cost allocation ignores interdepartmental services provided from one service department to another service department and allocates all service department costs directly to operating departments.

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Definitions:

Economic System

The organized way in which a country allocates resources and distributes goods and services in its society.

Criterion

A principle or standard by which something can be judged or decided.

Efficiency

The optimal allocation of resources to produce goods and services in a way that maximizes output with the least waste or cost.

ATC Curve

A graph showing the average total cost of producing different quantities of a good, illustrating how costs change with output levels.