When Actual Cost-Allocations Rates Are Used ________

question 149

Multiple Choice

When actual cost-allocations rates are used ________.

• A) user divisions pay for costs that exceed budgeted amounts
• B) managers of the supplier division are motivated to improve efficiency
• C) user divisions are unaware of the allocated amounts until the end of the budget period
• D) managers know with certainty the rates to be used in that budget period

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Definitions:

Conversion Cost

The combined cost of direct labor and manufacturing overheads, representing the total expense to convert raw materials into finished goods.

Transferred-In Materials

The costs of materials that were processed in a prior production department and then moved to a subsequent process or department.

Process Cost Accounting

A method of accounting used in manufacturing environments to allocate costs to products based on the processes they go through.

Cost Concept

An accounting principle that dictates all goods and services purchased are recorded at their original purchase cost.