Question

Which of the following is true?

Cost allocation is a way to distribute costs from support departments to revenue-producing departments.

In the step-down cost-allocation method, the order which support areas are allocated can affect the organization's total costs.

In the step-down method, the indirect department that receives the least amount of service from other indirect departments and provides the most service to other departments allocates its cost last.

All of them are false

Answer 1

Ans Cost allocation is a way to distribute costs from support departments to revenue-producing departments.

It helps in determining cost of each department.

Answer 2

The correct statement is:

In the step-down method, the indirect department that receives the least amount of service from other indirect departments and provides the most service to other departments allocates its cost first.

This statement is true in the context of the step-down cost-allocation method. The step-down method allocates costs from support departments to revenue-producing departments based on the services they provide and receive from each other. The department that receives the least service from other indirect departments and provides the most service to other departments is allocated its cost first in the step-down method. This helps to better reflect the actual utilization of resources within the organization.