COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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All services between intermediate cost centers are simultaneously allocated to final cost centers.
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It ignores services between intermediate cost centers.
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Linear algebra is required for the allocation.
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Once an allocation is made from one service department, no further allocation is made to this department.
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Detailed explanation-1: -Using the step method allocation of department costs, allocate some of the service department costs to other service departments. The step method recognizes that service departments provide services to other service departments. Then it allocates some of the costs accordingly.
Detailed explanation-2: -There are three methods for allocating service department costs: direct, sequential, and reciprocal. The first step of each method is to classify each organizational unit as either an operating or service department.
Detailed explanation-3: -The reciprocal method allocates services department costs to operating departments and other service departments. Under the reciprocal cost, the relationship between service departments is recognized and cost is allocated to and from each service department for services provided.
Detailed explanation-4: -The first step when allocating costs is to identify the cost objects for which the organization needs to separately estimate the associated cost.