Under the Step-Down Method of Allocation

question 103

Multiple Choice

Under the step-down method of allocation:

• A) The costs for the support department with the smallest total are allocated first
• B) When the second support department's costs are allocated, they are allocated to each of the other departments, but not to the first support department that was allocated.
• C) Once a support department's costs have been allocated, it is available for an additional allocation
• D) Support department costs are allocated solely to operating departments

---

Definitions:

Cumulative Unrecognized Loss

Losses that have not been realized through a transaction and are not reflected in financial statements, often relating to investments or assets held.

Amortization

The gradual reduction of a debt or the spreading out of capital expenses for intangible assets over a period.

Plan Asset Value

The market value of assets that are held within a pension or retirement plan.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or in determining the interest rate charged to financial institutions for loans from the Federal Reserve.