Which of the following is TRUE regarding the total service department cost allocated by the three recognized allocation method? O The reciprocal method results in the highest amount of total cost being allocated to operating departments as it recognizes all possible interactions among the support departments prior to allocation. O The answer will depend on how many service departments are involved in supporting operating departments. O The step method results in more total cost being allocated to operating departments than the direct method as it recognizes at least some portion of interactions among the support departments. O There is no difference among the three methods in terms of total cost being allocated to operating departments.

Which of the following is TRUE regarding the total service department cost allocated by the three recognized allocation method? O The reciprocal method results in the highest amount of total cost being allocated to operating departments as it recognizes all possible interactions among the support departments prior to allocation. O The answer will depend on how many service departments are involved in supporting operating departments. O The step method results in more total cost being allocated to operating departments than the direct method as it recognizes at least some portion of interactions among the support departments. O There is no difference among the three methods in terms of total cost being allocated to operating departments.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service? Multiple Choice Reciprocal method. O Direct method. Step method. O Cross-functional method. Indirect method.
Which of the following statements is false about the order in which management determines the sequencing of support department allocations under the sequential method of allocating support department costs to production departments? a.Departments with higher costs are allocated earlier. b.Departments serving a large number of support departments are allocated earlier. c.Departments with more employees are allocated earlier. d.Departments with more accurate cost drivers are allocated earlier.
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Part 1: Allocate the costs of the 3 service departments using the direct method. Part 2: Allocate the costs of the 3 service departments using the step method, with the order determined by the greater percentage usage. Part 3: Allocate the costs of the 3 service departments using the reciprical method. Part 4:What is one strength and one drawback of each of the methods?
What are support departments, and why are their costs allocated to other departments? What process is used to allocate support department costs?
which cost allocation method to use to serve better support direct cost to producing departments?
Which of the following cost and cost allocation base have a stronger cause and effect relationship? A) administration costs and cubic feet B) setup costs and square feet C) quality control costs and the number of inspections D) machine maintenance and setup hours