(Appendix 4B)Grant Company Has Several Service Departments That Provide Services

question 45

Multiple Choice

(Appendix 4B) Grant Company has several service departments that provide services to each other as well as to operating departments within the company.Which method would be least accurate in allocating the company's service department costs?

• A) The sequential method.
• B) The direct method.
• C) The step-down method.
• D) The reciprocal method.

---

Definitions:

Equity

The value of an ownership interest in property, including shareholders' equity in a business.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Inventory Turnover

An activity ratio that measures the liquidity of the firm’s inventory—how quickly goods are sold and replenished.

Average Collection Period

A measure of how long it takes a firm to convert a credit sale (internal store credit, not credit card sales) into a usable form (cash).