For performance evaluation purposes, actual service department costs instead of budgeted service department costs should be allocated to operating departments.

Question

Quizplus · Accepted Answer

Using actual costs can lead to inefficiencies and lack of control, as operating departments may not have an incentive to manage costs effectively. Budgeted costs provide a standard for comparison and encourage cost control.

For Performance Evaluation Purposes, Actual Service Department Costs Instead of Budgeted