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.

Question

Quizplus · Accepted Answer

Budgeted rates may help the manager of a support department to improve efficiency. This is because when using budgeted rates, the support department has an incentive to keep their internal costs low in order to stay competitive with external outsourcing options. As a result, the support department may work to improve efficiency and reduce costs in order to keep their rates competitive.

When Choosing Between Using Budgeted Rates, and Actual Rates, Which