Step-Down Method of Cost Allocation


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question 1 of 3

Which of these is true about the step-down method of cost allocation?

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1. Which of the following is an advantage of the step-down method of cost allocation?

2. What is the biggest disadvantage of the step-down method?

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About This Quiz & Worksheet

There are many different methods of cost allocation, this quiz/worksheet combo focuses on step-down costing. Use this quiz to test your understanding of how you can best define, use and evaluate the step-down method.

Quiz & Worksheet Goals

In this assessment, you'll be quizzed over information concerning step-down cost allocation, including:

  • The flaws and restrictions in step-down costing
  • How step-down costing can be used effectively
  • The costs allocated in step-down costing

Skills Practiced

  • Making connections - use your knowledge of step-down costing to understand how it can be used to identify problematic departments
  • Information recall - access the knowledge you've gained regarding cost allocation
  • Knowledge application - use your knowledge to answer questions about assigning overhead costs to departments

Additional Learning

To continue studying this type of cost allocation, you can review the lesson titled Step-Down Method of Cost Allocation. This lesson covers the following topics:

  • Determining costs
  • Using the correct ledger accounts and entries for transferring costs
  • The pros and cons of this method of costing
  • The best use of this cost allocation method
  • Examples of step-down costing