Which of the Following Formulas Should Be Used to Allocate

question 58

Multiple Choice

Which of the following formulas should be used to allocate variable costs from service departments to user departments?

• A) budgeted unit rate × total budgeted units planned to be used
• B) actual unit rate × total budgeted units planned to be used
• C) budgeted unit rate × actual units used
• D) actual unit rate × actual units used

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Definitions:

Machine Breakdowns

Unplanned events where machinery or equipment fails to function correctly, leading to production delays, increased maintenance costs, and potential operational losses.

Increase In Utility Costs

A rise in the expenses associated with utilities such as electricity, water, and gas consumed by a business or individual.

Purchase Price Variances

Differences between the actual cost of materials purchased and the expected (budgeted) cost, often analyzed in cost accounting.

Standard Cost

A predetermined cost of manufacturing a product or providing a service, used as a benchmark to measure actual performance and efficiencies.