The step-down method of allocation improves the direct method by:
A)Considering the reciprocity in consumption partially.
B)Simplifying the allocation approach.
C)Allocating more of the total cost of the service activity.
D)Using a statistical approach to allocation.
E)None of the above.

Question

Quizplus · Accepted Answer

The step-down method takes into account the fact that some service departments provide services to other service departments as well as to production departments. This means that the costs of these service departments should be allocated partially based on their own usage of resources and partially based on the resources they provide to other departments. This partially considers the reciprocity in consumption.

The Step-Down Method of Allocation Improves the Direct Method By