Which of the Following Is a Disadvantage for Using Budgeted

question 53

Multiple Choice

Which of the following is a disadvantage for using budgeted costs instead of actual costs for support department cost allocation?

• A) Managers know their exact costs in advance and have no incentive to minimize use of services.
• B) Budgeted costs do not reflect current usage, and so managers may overuse support services.
• C) Allocated support department costs are not under the manager's control.
• D) Support departments might be cut back because services are likely to be underused.

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Definitions:

Conglomerate Merger

A union between firms that are involved in totally unrelated business activities.

Vertical Merger

A merger between companies in the same industry but at different stages of the production process, aiming at creating efficiencies or reducing costs.

Consolidation

The process of combining multiple accounts or businesses into a single entity, often for the purpose of simplifying financial statements or achieving operational efficiencies.

Holding Company

A company that owns other companies. A parent company.