In determining performance in a cost center, actual costs incurred should be compared to
A) budgeted costs at the budgeted level of activity.
B) budgeted costs at the actual level of activity.
C) standard costs at the budgeted level of activity.
D) allocated costs at the actual level of activity.
E) none of the above.

Question

Quizplus · Accepted Answer

In determining performance in a cost center, it is most accurate to compare actual costs incurred to budgeted costs at the actual level of activity. This comparison allows for an understanding of how well the cost center managed its costs relative to what was expected, given the actual volume of work or production achieved. Comparing to budgeted costs at the actual level of activity accounts for variations in activity levels, providing a fair assessment of performance.

In Determining Performance in a Cost Center, Actual Costs Incurred