Why Do Organizations Use Budgeted Rates Instead of Actual Rates

question 112

Essay

Why do organizations use budgeted rates instead of actual rates to allocate the costs of support departments to each other and to user departments and divisions? Explain.

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Definitions:

Accounts Payable

The amounts owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Promissory Note Receivable

This is a financial asset representing a written promise by one party to pay a specified sum of money to another party under agreed terms.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan remaining.

Basic Formula

Typically refers to the accounting equation: Assets = Liabilities + Equity.