The step-down method requires that an order of allocation is established before service department costs can be allocated to operating departments.

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The step-down method involves allocating service department costs sequentially in a predetermined order, starting with the service department that has the highest percentage of services provided to other service departments and then continuing in decreasing order until all service department costs have been allocated to operating departments. Thus, an order of allocation must be established before the allocation process can begin.

The Step-Down Method Requires That an Order of Allocation Is