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Costs

1. The step-down method allocates more costs to the producing departments than does the direct method.  Do you agree? Explain.

2. Sometimes direct-labor cost is the best cost-allocation base for overhead application even if wage rates vary within a department.  Do you agree? Explain.

3. An increasing number of companies are using variable costing in their corporate annual reports.  Do you agree? Explain.

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1. The step-down method allocates more costs to the producing departments than does the direct method. Do you agree? Explain.

I agree because the goal is to reduce the costs as much as possible, rather than the opposite when it comes to the direct method. This is because the direct method is a means of dealing with cash flows during a certain period; whereas, when using the step-down method a person is able to reduce them as much as possible by means of spreading everything out for those involved. For example, the direct method uses less cash flow than that of step-down because it is done within a timeframe; however, the step-down method is so broad that is covers any area that is in need of help in order to save the company money. In essence, a company is able to benefit from reducing costs by using step down than any other procedure that is available to use at that time. Through this method, someone is able to make sure to save the organization much money in order to prevent any kind of issues or fines that could occur because of not handling the finances well. Regardless, a person is able to do their job effectively ...

Solution Summary

This solution discussed the step down and direct method as well as labor, best allocation and variable costs with accounting.

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