The Step-Down Method of Allocating Service Department Costs

question 106

Multiple Choice

The step-down method of allocating service department costs:

• A) is a less accurate method of allocation than the direct method.
• B) can't be used when a company has more than two service departments.
• C) is a simpler allocation method than the direct method.
• D) ignores some interdepartmental services.

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Definitions:

Goods Sold

Represents the total quantity of goods that have been sold to customers during a specific accounting period.

Cost Accounting Systems

Systems that measure, record, and report product costs.

Product Costs

The expenses directly associated with creating a product, including materials, labor, and manufacturing overhead.

Job Order Cost System

A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.