A Method for Allocating Service Department Costs That Ignores Other

question 99

Multiple Choice

A method for allocating service department costs that ignores other service departments when any given service department's costs are allocated to the revenue-producing departments is called the

• A) direct method.
• B) indirect method.
• C) step-down method.
• D) step-up method.

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Definitions:

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life.

Operating Expenses

Costs associated with running a business's day-to-day activities, excluding the cost of goods sold, such as rent, utilities, and payroll.

Liquidity Ratio

A financial metric used to determine a company's ability to pay off its short-term liabilities with its most liquid assets.

Inventory Turnover

This is a ratio showing how many times a company's inventory is sold and replaced over a period, usually a year, indicating the efficiency of inventory management.