Re-Review: 1A1, 1A2, 1A3

Question 1

Step-Down Method for allocating costs

Answer 1

First: find allocation base for all departments which excludes amount for you are comparing too.

Question 2

Residual Income

Answer 2

= Operating Income - Target return on average invested capital

Question 3

Absorbtion Costing

Answer 3

GAAP and tax law on allow the use of absorption costing for external reporting. absorption costing, fixed manufacturing costs are inventoriable