COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A cause and effect basis is the preferred method of allocation
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Each method allocates the same total cost when there are no interservice department activities
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If a cause and effect relationship cannot be established for service department costs, then an allocation cannot be conducted.
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The level of detail associated with allocating service department costs should be decided on a cost-benefit basis.
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Detailed explanation-1: -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-2: -There are three methods for allocating service department costs: direct, sequential, and reciprocal.
Detailed explanation-3: -The sequential (or step) method of allocation recognizes that interactions among support departments do occur.
Detailed explanation-4: -Which of the following statements is true about dual-rate method of allocating support-department costs? The dual-rate method partitions the cost of each support department into two pools, a variablecost pool and a fixed-cost pool.