If the allocation is for performance evaluation, the allocation of variable support department costs would be calculated as
A)Actual rate × Actual usage.
B)Actual rate × Budgeted usage.
C)Budgeted rate × Actual usage.
D)Budgeted rate × Budgeted usage.

Question

Quizplus · Accepted Answer

When the allocation is for performance evaluation, the budgeted rate (the rate estimated at the beginning of the period) should be used to calculate the allocation of variable support department costs, rather than the actual rate (the rate calculated at the end of the period). Using actual rates and usage would not be appropriate as it would not reflect the budgeted expectations for the period. Therefore, the correct formula would be budgeted rate x actual usage.

If the Allocation Is for Performance Evaluation, the Allocation of Variable