There Are Several Methods for Allocating Service Department Costs to Production

question 94

Multiple Choice

There are several methods for allocating service department costs to production departments.The method which recognizes service provided by one service department to another but does not recognize reciprocal interdepartmental service is called: (CMA adapted)

• A)direct method.
• B)variable method.
• C)linear method.
• D)reciprocal methoD.
• E)step-down method.

---

Definitions:

Average Total Cost

The total cost of production divided by the number of units produced, reflecting the cost per unit.

Competitive Price-searcher Firm

A company that sets its own prices based on its products, costs, and the competitive environment, rather than taking the market price as given.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the average cost per unit.

Economic Profit

The difference between total revenue and the total opportunity costs of all resources used in production, including implicit and explicit costs.