Which of the following formulas should be used to allocate variable costs from service departments to user departments?
A) budgeted unit rate × total budgeted units planned to be used
B) actual unit rate × total budgeted units planned to be used
C) budgeted unit rate × actual units used
D) actual unit rate × actual units used

Question

Quizplus · Accepted Answer

The formula used to allocate variable costs from service departments to user departments is the budgeted unit rate × actual units used. This is because it takes into account the expected usage of resources (budgeted unit rate) and applies it to the actual usage of resources (actual units used) by each user department. This provides a more accurate allocation of variable costs than using either solely budgeted or actual rates and units.

Which of the Following Formulas Should Be Used to Allocate