This answer is incorrect because it is not a method of allocating service department costs.
Under the reciprocal method the costs of the service departments are allocated to each other, so there is a recognition of reciprocal interdepartmental service.
Under the step method, the services that one department provides to the other departments are recognized. However, in the allocation of the costs of the second service department, no costs are allocated back to the first department. In the allocation of the costs of the third service department, no costs are allocated back to the first or second service department, and so on.
Under the direct method no costs are allocated between the service departments.
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