Which of the Following Statements About Reciprocal Service Department Costs

question 194

Multiple Choice

Which of the following statements about reciprocal service department costs is correct?

• A) They are allocated to producing departments under the direct method but not allocated to producing departments at all under the step-down method.
• B) They are allocated to producing departments under the step-down method but not allocated to producing departments at all under the direct method.
• C) They are not allocated to producing departments under either the direct or the step-down methods.
• D) They are allocated to producing departments under both the direct and step-down methods.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate overhead costs to products or services.

Machine-Hours

A measure of production output or operational time, calculated by the number of hours machines are running.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries for employees not working directly on the product.

Direct Labor Cost

The total cost of all labor hours worked directly on the production of goods or services, excluding indirect labor costs.