Asked by Jennifer Nicole on Jul 22, 2024
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In both the direct and step-down methods of allocating service department costs, any amount of the allocation base that is attributable to the service department whose cost is being allocated is ignored.
Step-Down Method
The step-down method is an accounting technique used to allocate service department costs to production departments, often in a sequential manner that recognizes service departments' interdependencies.
Direct Method
A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom.
- Assess the divergences and practicalities of direct and step-down modalities for distributing costs within service departments.
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Learning Objectives
- Assess the divergences and practicalities of direct and step-down modalities for distributing costs within service departments.
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