Which of the following statements regarding the allocation of cost from other departments to the multiple operating departments of a large firm is/are true? 1. When allocating costs of departments such as Marketing and Logistics to the operating departments of the firm, the direct method should always be used (instead of the reciprocal or step- down method). 2. When allocating costs of departments such as Legal, Information Technology and Human Resources to the operating departments of the firm, the reciprocal method should always be used (instead of the direct or step-down method). 3. The allocation of support department costs to operating departments occurs in large manufacturing firms but not in large firms that provide services. Statement 1 only Statement 2 only O Statement 3 only Statement 1 and 2 only O Statement 1 and 3 only

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...
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Question 11
Which of the following statements regarding the allocation of cost
from other departments to the multiple operating departments of a
large firm is/are true?
1. When allocating costs of departments such as Marketing and
Logistics to the operating departments of the firm, the direct
method should always be used (instead of the reciprocal or step-
down method).
2. When allocating costs of departments such as Legal, Information
Technology and Human Resources to the operating departments of
the firm, the reciprocal method should always be used (instead of
the direct or step-down method).
3. The allocation of support department costs to operating
departments occurs in large manufacturing firms but not in large
firms that provide services.
Statement 1 only
Statement 2 only
Statement 3 only
Statement 1 and 2 only
Statement 1 and 3 only
Transcribed Image Text:Question 11 Which of the following statements regarding the allocation of cost from other departments to the multiple operating departments of a large firm is/are true? 1. When allocating costs of departments such as Marketing and Logistics to the operating departments of the firm, the direct method should always be used (instead of the reciprocal or step- down method). 2. When allocating costs of departments such as Legal, Information Technology and Human Resources to the operating departments of the firm, the reciprocal method should always be used (instead of the direct or step-down method). 3. The allocation of support department costs to operating departments occurs in large manufacturing firms but not in large firms that provide services. Statement 1 only Statement 2 only Statement 3 only Statement 1 and 2 only Statement 1 and 3 only
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