A Company Has Several Service Departments That Provide Differing Amounts

question 3

Multiple Choice

A company has several service departments that provide differing amounts of service to each other and to the company's operating departments. Which of the following statements is true?

• A)The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.
• B)The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
• C)The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
• D)The direct method is more accurate than the step-down method when service departments provide services to each other.

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Definitions:

Internal Leakage

The unintentional flow of fluid between internal components of a system, such as in hydraulic or pneumatic systems, leading to reduced efficiency or failure.

Hydraulic Cylinder Circuit

A system designed with hydraulic cylinders to operate machinery by means of fluid pressure.

Nominal Diameter

A specification of the general or approximate diameter of cylindrical components, such as pipes or fasteners, often used in engineering.

Hydraulic Hose

A flexible tube used to convey hydraulic fluid between components in a hydraulic system, allowing for the transmission of power.