Question

Distinguish among the three methods of allocating the costs of support departments to operating departments.

Answer 1

The three methods of allocating the costs of support departments to operating departments are:-

a. The direct (assignment) method ignores all services provided by one support organization to another support organization. Allocate the cost of each support department directly to the

operations department. The

b. step-down (allocation) method sequentially allocates support department costs to other his

support departments and operations departments in such a way that the

partially approves the mutual service of all support departments.

c. The Mutual (Attribution) process allocates support department costs to operations by fully authorizing the mutual services provided between all support departments.

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