Variable service department costs should be charged to operating departments at the end of the period according to the formula:
A) Budgeted rate x Budgeted activity.
B) Budgeted rate x Actual activity.
C) Actual rate x Actual activity.
D) Budgeted total cost x Percentage of peak-period capacity required.

Question

Quizplus · Accepted Answer

Variable service department costs should be charged based on the amount of activity actually used by the operating departments, which is measured by actual activity. The budgeted rate should also be used to maintain consistency with the budgeted amounts. Therefore, the formula Budgeted rate x Actual activity is the most appropriate for charging variable service department costs to operating departments at the end of the period.

Variable Service Department Costs Should Be Charged to Operating Departments