(Appendix 4B)Which of the following statements about reciprocal service department costs is correct?
A) They are allocated to producing departments under the direct method but not allocated to producing departments at all under the step-down method.
B) They are allocated to producing departments under the step-down method but not allocated to producing departments at all under the direct method.
C) They are not allocated to producing departments under either the direct or the step-down methods.
D) They are allocated to producing departments under both the direct and step-down methods.

Question

Quizplus · Accepted Answer

Reciprocal service department costs are allocated to producing departments under both the direct and step-down methods. The direct method would allocate costs based solely on the services provided by each department, without accounting for services that the service departments provide to each other. The step-down method does take into account reciprocal services, but the order of allocation (sequential vs. simultaneous) can affect the results.

(Appendix 4B)Which of the Following Statements About Reciprocal Service Department