Which of the Following Describes Who the Direct Allocation Method

question 38

Multiple Choice

Which of the following describes who the direct allocation method allocates support-department costs?

• A) it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments
• B) it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments
• C) it allocates each support-department's costs to operating departments only
• D) it requires managers to rank the support departments in the order that the step-down allocation is to proceed

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Definitions:

Payments

The act of transferring money or value from one party to another as a settlement for a service, debt, or obligation.

Interest Expense

The cost incurred by an entity for borrowed funds, often appearing as a line item on the income statement.

Notes Payable

Financial obligations or loans evidenced by promissory notes, which the borrower promises to pay back to the lender according to agreed terms.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.