What Should Fixed Support Department Costs Allocation Be Based On

question 16

Multiple Choice

What should fixed support department costs allocation be based on?

• A)current actual usage of service
• B)current budgeted usage of service
• C)practical capacity of user departments
• D)actual capacity of user departments

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Definitions:

Actual Total Labour Cost

The real amount spent on wages and benefits for employees involved in the production process during a specific period.

Standard Labour Rate

The pre-established rate per hour that a company expects to pay for direct labor.

Actual Units

The real quantity of items produced, sold, or consumed, as opposed to planned or theoretical quantities.

Variable Overhead Spending Variance

This is the difference between the actual variable overheads incurred and what was expected or budgeted, based on the actual level of production activity.