When choosing between budgeted usage and actual usage as allocation bases, which of the following is true?
A) Actual rates let users know in advance what their costs are.
B) When budgeted rates are used, users must wait till the end of the budget period to know what their costs are.
C) With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances.
D) Budgeted rates may lead to user departments outsourcing needed work, rather than relying on an internal support department.
E) Budgeted rates may help the manager of a support department to improve efficiency.

Question

Quizplus · Accepted Answer

Budgeted rates may help the manager of a support department to improve efficiency by providing targets to aim for and allowing for a better understanding of costs. Choosing between budgeted usage and actual usage as allocation bases depends on the organization's goals and objectives. Actual usage may be more appropriate in situations where there is uncertainty about the amount of support needed, while budgeted usage may be more appropriate in situations where there is a predictable level of support required. However, overall, budgeted rates may offer more opportunities for improvement and should be the preferred allocation base.

When Choosing Between Budgeted Usage and Actual Usage as Allocation