What allocation method recognizes that service departments often provide each other with interdepartmental services,and it is therefore considered to be the most accurate method for allocating service department costs to operating departments?
A) The direct method.
B) The step-down method.
C) The reciprocal method.
D) The allocation by cost behaviour method.

Question

Quizplus · Accepted Answer

The reciprocal method recognizes that service departments provide each other with interdepartmental services and considers such services when allocating service department costs to operating departments. This makes it the most accurate method for allocating service department costs to operating departments compared to the direct method or the step-down method. The allocation by cost behaviour method is not relevant to the allocation of service department costs to operating departments.

What Allocation Method Recognizes That Service Departments Often Provide Each