Chapter 4.B, Problem 1E

To determine

Step Down Method of Cost Allocation: Under this method of cost allocation, the costs incurred by the various cost centers such as the departments of an organization, are allocated to other departments.

The cost allocation is done by determining the sequence in which costs of departments with the largest cost incurred are to be allocated. The next step is to choose an appropriate basis for cost allocation and then distributing the costs from the first cost center to the next. The process is repeated till the costs from all the predetermined cost centers are distributed to the final level.

Cost allocation from service departments to operating departments.