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The step-down method is also called the sequential method. This method allocates the costs of some service departments to other service departments, but once a service department's costs have been allocated, no subsequent costs are allocated back to it. The choice of which department to start with is important.

The step down method In these circumstances the costs of the service cost centre that serves most other service cost centres should be reapportioned first. We then 'step down' to the service cost centre that provides the second most service, and so on.

The second method of allocating service department costs is the step method. This method allocates service costs to the operating departments and other service departments in a sequential process. The sequence of allocation generally starts with the service department that has incurred the greatest costs.

Hospital 2552-10 Cost Report Data files. The data included in this release contains cost reports with fiscal years beginning on or after May 1, 2010 . Hospital cost reports beginning before May 1, 2010 are reported on the old form 2552-96, and can be found in other data files on this site.

Unlike some other methods, the step-down method allows you to transfer costs from one service department to another. From there, the costs can be further transferred to departments that make money.

The step-down method will allocate the cost of each cost center, as well as the costs stepped down to it, to the major functional services. Each cost center must have a statistical basis to allocate its cost.