Sequential method

The sequential method is used to allocate the cost of service departments to other departments within an organization. Under this approach, the cost of each service department is allocated one department at a time. Thus, the cost of one service department is allocated out to all user departments, which may include other service departments. Once these costs have been allocated, the costs of the next service department are allocated. The first department cannot receive an allocation from any other departments - in essence, there is a one-way cost allocation.

The sequential method is also called the step allocation method.

Related Courses

Activity-Based Costing
Cost Accounting Fundamentals