Hi.

TRUE OR FALSE. State your explanation.

1.The direct method ignores the fact that some service departments provide service to other service departments.

2. The step-down method of service department cost allocation completely ignores the provision of services by one service department to another service department.

3.City Hospital has two service departments (Patient Records and Accounting) and two "production" departments (Internal Medicine and Surgery). It uses the reciprocal-services method of cost allocation and should allocate Internal Medicine cost to Surgery.

4.When allocating service department costs, companies should use actual costs rather than budgeted costs, and separate rates for variable and fixed costs.

5. Dual cost allocation works with either the direct method or the step-down method of allocation.

6.A company that uses activity-based costing would likely allocate costs from activity-cost pools to products and services.

7.The breakdown of costs by departments is much finer than a breakdown by activities in an ABC system.

8.The Gross Margin at Split-Off method should be selected if a company terminates all processing at the split-off point and desires to use a cost-allocation approach that considers the "revenue-producing ability" of each product.

9.In the net-realizable-value method, the joint cost is allocated to the joint products in proportion to the joint products' net realizable values.

10.The net-realizable-value method is the least preferred cost allocation method since it does not consider the economic characteristics of the joint products.

-ma