Use the information below to answer the following question(s).Low-Cost Rentals Ltd.incurred $60,000 of common fixed costs and $90,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-An advantage to using budgeted usage, rather than actual usage, for the allocation base is that
A)ASPE/IFRS requires it for comparability to previous years.
B)variable costs are lower.
C)management does not have to be accountable for actual costs since the system only deals with budgeted costs.
D)it is consistent with a short-run time horizon.
E)user divisions will know their allocated costs in advance.

Question

Use the information below to answer the following question(s).Low-Cost Rentals Ltd.incurred $60,000 of common fixed costs and $90,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used.  For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-An advantage to using budgeted usage, rather than actual usage, for the allocation base is that
A)ASPE/IFRS requires it for comparability to previous years. 
B)variable costs are lower. 
C)management does not have to be accountable for actual costs since the system only deals with budgeted costs. 
D)it is consistent with a short-run time horizon. 
E)user divisions will know their allocated costs in advance.

Quizplus · Accepted Answer

Using budgeted usage allows user divisions to know their allocated costs in advance, which aids in planning and decision-making.

Use the Information Below to Answer the Following Question(s)