Consider the Following Statements About the Step-Down Method of Service

question 76

Multiple Choice

Consider the following statements about the step-down method of service department cost allocation:
I. Under the step-down method, all service department costs are eventually allocated to production departments.
II. The order in which service department costs are allocated is important.
III. After a service department's costs have been allocated to other departments, no costs are re-circulated back to that service 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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Definitions:

Economic Sectors

Divisions within an economy segregating different types of economic activities, such as agriculture, industry, and services.

Primary Sector

The sector of an economy focused on the extraction and collection of natural resources, such as agriculture, mining, and forestry.

Secondary Sector

The portion of the economy that includes industries involved in the processing, transforming, and manufacturing of goods from raw materials.

Tertiary Sector

The segment of the economy that provides services to consumers, including retail, health care, and education.