In both the direct and step-down methods of allocating service department costs, any amount of the allocation base that is attributable to the service department whose cost is being allocated is ignored.

Step-Down Method

The step-down method is an accounting technique used to allocate service department costs to production departments, often in a sequential manner that recognizes service departments' interdependencies.

Direct Method

A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom.