The support department cost allocation method that fully accounts for the mutual provision of services between support departments is called the:
A) direct method.
B) step-down method.
C) reciprocal method.
D) dual cost allocation method.

Question

Quizplus · Accepted Answer

The reciprocal method is the only cost allocation method that fully accounts for the mutual provision of services between support departments by allocating costs based on the services received and provided by each support department. The direct method only allocates costs based on the services provided to the operating departments, while the step-down method accounts for some mutual services but not all. The dual cost allocation method is not a recognized cost allocation method.

The Support Department Cost Allocation Method That Fully Accounts for the Mutual