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

Question

Quizplus · Accepted Answer

Variable service department costs should be charged to operating departments based on the actual activity they used during the period. Therefore, the formula should be budgeted rate (planned cost per unit of activity) multiplied by actual activity (the amount of service actually used by the operating departments). Option B reflects this formula.

Variable Service Department Costs Should Be Charged to Operating Departments