Consider the following statements about the step-down method of service department cost allocation:
I. Under the step-down method, all service department costs are eventually allocated to production departments.
II. The order in which service department costs are allocated is important.
III. After a service department's costs have been allocated to other departments, no costs are re-circulated back to that service department.
Which of the above statements is (are) correct?
A) I only.
B) II only.
C) I and II.
D) I and III.
E) I, II, and III.

Question

Quizplus · Accepted Answer

The step-down method of service department cost allocation involves allocating all service department costs to production departments (I), the order of allocation matters because it affects the allocation results (II), and once a service department's costs are allocated, they are not re-allocated back to that department (III).

Consider the Following Statements About the Step-Down Method of Service