The method which allocates the cost of support department to only operating departments is called ___________?
Correct answer: B. direct method
- A. indirect method
- B. direct method
- C. step down method
- D. reciprocal method
Explanation
The direct method allocates each support department's cost only to operating departments and ignores services exchanged among support departments. The step-down and reciprocal methods account for such interdepartmental services to varying degrees.
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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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