If a portion of the actual cost incurred by a service department is not charged to operating departments, then at the end of the period, this uncharged cost should be:
A)allocated equally between the other departments.
B)allocated between the other departments in proportions to budgeted activity.
C)treated as a variance of the service department.
D)treated as a variance of the other departments.

Question

Quizplus · Accepted Answer

The uncharged cost is considered a variance of the service department as it represents a deviation from the planned or budgeted cost. Allocating this cost equally or in proportion to budgeted activity among other departments would not accurately reflect the actual cost and could lead to incorrect departmental performance evaluations. Therefore, the uncharged cost should be treated as a variance of the service department.

If a Portion of the Actual Cost Incurred by a Service