(Appendix 12B)For performance evaluation purposes, any variance between budgeted fixed costs and actual fixed costs in a service department:
A)should be allocated both to operating departments and to other service departments on the basis of usage.
B)should be allocated to operating departments only on the basis of usage.
C)should be allocated to other service departments only on the basis of usage.
D)should be retained in the service department itself.

Question

Quizplus · Accepted Answer

Fixed costs are expected to remain the same regardless of the level of activity. Therefore, any variance between budgeted and actual fixed costs in a service department should be retained in the department itself. It should not be allocated to operating departments or other service departments, as they do not have any control over the fixed costs of the service department. Retaining the variance in the service department allows for a more accurate evaluation of the department's performance.

(Appendix 12B)For Performance Evaluation Purposes, Any Variance Between Budgeted Fixed