Answer (C) is correct . The three most common methods of allocating service department costs are the direct method, the step method, and the reciprocal method (also called the simultaneous equations method). The reciprocal method is theoretically the preferred method because it recognizes reciprocal services among service departments.
Answer (A) is incorrect because The direct method does not recognize the fact that service departments might provide services to each other; all costs are assigned directly to production departments.
Answer (B) is incorrect because The variable method is a nonsense term as used here.
Answer (D) is incorrect because The linear method is not one of the methods used to allocate departmental costs.
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