Detailed Answer
Answer (D) is correct.
The three major methods of allocating service department costs, in order
of increasing sophistication, are the direct method, the step-down
method, and the reciprocal (or simultaneous-equations) method. The
direct method is the simplest. It involves allocating all service
department costs to production departments without recognizing any
service provided by one service department to another. The step-down
method is a sequential process that allocates service costs among service as well as production departments. However, once a department’s costs
have been allocated, no additional allocations are made back to that
department. The reciprocal method uses simultaneous equations to
recognize mutual services. The latter method is the most complex.