Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services.

Question

Quizplus · Accepted Answer

Allocating variable costs on the basis of budgeted usage would mean that the departments will be charged a fixed amount based on their estimated usage. This would not provide any incentive for them to control their consumption of support services, as their costs will remain the same regardless of how much they use. In order to incentivize departments to control their consumption, it is better to allocate costs based on actual usage.

Allocating Variable Costs on the Basis of Budgeted Usage Would