ASSIGNMENT II

Assignment II



Assignment II

Methods of Cost Allocation

Direct method is a cost allocation method under which any of the allocation base attributable to the service departments themselves is ignored; only the amount of the allocation base attributable to the operating departments is used in the allocation. The direct method is the simplest of the three cost allocation methods. It ignores reciprocal or interdepartmental services (services provided by a service department to another service department) and allocates all costs of service departments directly to operating departments. Even if a service department (such as personnel department) provides a large amount of service ...