The method, which allocates cost of support department for operating departments by recognizing all the mutual services provided is classified as ___________?
Correct answer: D. reciprocal method
- A. indirect method
- B. direct method
- C. step down method
- D. reciprocal method
Explanation
The reciprocal method recognizes all mutual services exchanged among support departments before allocating their costs to operating departments. This distinguishes it from the direct and step-down methods.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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