If the Allocation Is for Product Costing, the Allocation of Variable

question 139

Multiple Choice

If the allocation is for product costing, the allocation of variable support department costs would be calculated as

• A)Actual rate × Actual usage.
• B)Actual rate × Budgeted usage.
• C)Budgeted rate × Actual usage.
• D)Budgeted rate × Budgeted usage.

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Definitions:

Economic Life

Refers to the period over which an asset is expected to be usable by an organization, impacting its depreciation calculation and budgetary decisions.

Incremental Borrowing Rate

The interest rate a borrower would have to pay in the current market environment for a similar loan with similar terms and conditions.

Implicit Rate

The interest rate implied in the terms of a lease or financial arrangement, often used in leasing transactions to calculate lease payments.

Economic Life

The period over which an asset is expected to be economically useful to the owner.