A company may choose to use budgeted rates to allocate direct labour accounts if direct labour costs are difficult to trace to jobs as they are completed.

Question

Quizplus · Accepted Answer

Budgeted rates can be used as a proxy for actual direct labour costs if tracing direct labour costs to individual jobs is not feasible. By using budgeted rates, indirect labour costs can be allocated to a job based on a predetermined rate, which can be useful in situations where actual direct labour costs are unknown or difficult to track.

A Company May Choose to Use Budgeted Rates to Allocate