Which of the following is a method of allocation used to assign service department costs to production departments, but not to other service departments?
A)Equity method
B)Direct method
C)Lump-sum method
D)Traditional method

Question

Quizplus · Accepted Answer

The direct method allocates service department costs only to the production departments based on actual usage, while ignoring any allocations to other service departments. The equity method allocates costs to all departments, including other service departments, based on their share of the total costs. The lump-sum method allocates a fixed amount to each department without regard to actual usage. The traditional method uses a step-by-step process of sequentially allocating costs from service departments to production departments, which may include allocations to other service departments.

Which of the Following Is a Method of Allocation Used