Question

Company has prepared department overhead budgets for​ budgeted-volume levels before allocations as​ follows:

Answer 1

Allocating costs of support departments; step-down and direct methods. The Eastern Summit Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows:



Management has decided that the most appropriate inventory costs are achieved by using individualdepartment overhead rates. These rates are developed after support-department costs are allocated to operating departments
Step-by-Step Solution:

Step 1 of 3

Step down Method – which allocates support department cost to other support departments & operating departments in a sequential method that partially recognizes the mutual services provided to other support departments. This means step down method partially recognizes services to other support departments.