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

Question content area bottom

Part 1

The

reciprocal allocation method

ignores any services rendered by one support department to another; it allocates each support department's costs directly to the operating departments.

The

direct allocation method

allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments.

The

step-down allocation method

allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments.