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

question 157

Multiple Choice

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.

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Definitions:

Fixed Manufacturing Overhead Budget

A predetermined estimate of the total fixed costs required to support production activities, excluding variable costs directly tied to production volume.

Volume Variances

Variances that occur when actual volume of production or sales differs from the planned volume, affecting revenue and expenses.

Variable Component

The portion of a cost or expense that varies directly with the level of production or business activity.

Fixed Component

The part of cost or expense that remains constant in total regardless of fluctuations in the level of activity or volume.