When budgeted cost allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.
When budgeted cost allocation rates are used, managers of the supplier division are motivated to improve efficiency.
When actual cost allocation rates are used, managers of the supplier division are motivated to improve efficiency.
When choosing between using budgeted rates, and actual rates, 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 based on user department estimates may lead to 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.