Cotton Company Has Two Service Departments and Three Operating Departments

Multiple Choice

Cotton Company has two service departments and three operating departments. In allocating service department costs to the operating departments, which of the following three methods (direct, step-down, reciprocal) will result in the same amount of service department costs being allocated to each operating department, regardless of the order in which the service department costs are allocated?

A) Direct and reciprocal methods only.
B) Step-down and reciprocal methods only.
C) Direct and step-down methods only.
D) Direct method only.