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Step-down allocation, also known as the sequential allocation method, involves distributing service department costs to both production and other service departments. To calculate it, first allocate the costs of the service departments to other service departments based on a predetermined allocation base (like labor hours or machine hours). After allocating costs to service departments, the remaining costs are then allocated to production departments. This method ensures that all costs are accounted for, providing a clearer picture of the overall cost structure.

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1mo ago

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