The budgeted cost-driver rate measures actual capacity utilisation.

Question

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The budgeted cost-driver rate is an estimated rate used to allocate indirect costs to cost objects. It is calculated by dividing the budgeted indirect costs by the estimated level of cost driver activity. It does not measure actual capacity utilization, but rather estimates the cost of utilizing a certain level of capacity. Actual capacity utilization can be compared to the estimated level of cost driver activity to analyze variances and make adjustments in future periods.

The Budgeted Cost-Driver Rate Measures Actual Capacity Utilisation