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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Is it true that the direct method is a method of cost allocation that charges costs of service departments to production departments and ignores any services used by other service departments?
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