When budgeted cost-allocations rates are used ________.
A) user departments are not informed about the charges until the end of the period
B) the manager of the supplier division bears the risk of unfavorable cost variances
C) user divisions pay for costs that exceed budgeted amounts
D) user divisions pay for inefficiencies of the supplier department

Question

Quizplus · Accepted Answer

When budgeted cost-allocations rates are used, the manager of the supplier division (the department responsible for providing goods or services to other departments) bears the risk of unfavorable cost variances, meaning they are responsible for any additional costs that may exceed the budgeted amount. The user departments are charged based on the predetermined cost allocation rate, but they do not pay for inefficiencies or charges that exceed the budgeted amount.

When Budgeted Cost-Allocations Rates Are Used ________