An Advantage to Using Budgeted Usage,rather Than Actual Usage,for the Allocation

question 99

Multiple Choice

An advantage to using budgeted usage,rather than actual usage,for the allocation base is that

• A)GAAP/IFRS requires it for comparability to previous years.
• B)variable costs are lower.
• C)management does not have to be accountable for actual costs since the system only deals with budgeted costs.
• D)it is consistent with a short-run time horizon.
• E)user divisions will know their allocated costs in advance.

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Definitions:

Absolute Value

Refers to the distance of a number from 0 on the number line, without considering direction.

Correlation Coefficient

A statistical index measuring the strength and direction of a linear relationship between two variables.

Average Error

A statistical measure that averages the absolute differences between the observed values and the values predicted by a model.

Independent Variable

The variable that is manipulated in an experiment to observe its effect on the dependent variable.