_____ should be used to allocate variable costs.
A)Budgeted unit rate x total budgeted units planned to be used
B)Actual unit rate x total budgeted units planned to be used
C)Budgeted unit rate x actual units used
D)Actual unit rate x actual units used

Question

Quizplus · Accepted Answer

Budgeted unit rate (i.e. expected cost per unit) should be multiplied by actual units used to allocate variable costs. This is because the actual units used is the most accurate measure of the resources consumed, and multiplying it with the budgeted unit rate gives a more realistic estimate of variable costs incurred. Option A is incorrect because it multiplies the budgeted unit rate with total budgeted units planned to be used, which may not reflect the actual units used. Option B is incorrect because it uses the actual unit rate (i.e. actual cost per unit), which may vary from the expected cost per unit. Option D is incorrect because it multiplies the actual unit rate with actual units used, which may not reflect the expected cost per unit.

_____ Should Be Used to Allocate Variable Costs