Solved 16 Why Do Organizations Use Budgeted Rates1216997

16) 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.

Objective 15.3

1) Special cost-allocation problems arise when:

A) support department costs exceed budgetary estimates

B) practical capacity is used as the allocation base

C) support departments provide reciprocal services to other support departments

D) there is more than one operating department

2) Which of the following departments is NOT a support department for a boat manufacturing company?

A) Personnel

B) Molding and assembly

C) Data processing

D) Accounting

3) The support department allocation method that is the most widely used because of its simplicity is the:

A) step-down method

B) reciprocal allocation method

C) direct allocation method

D) sequential allocation method

4) The method that allocates costs by explicitly including all the services rendered among all support departments is the:

A) direct method

B) step-down method

C) reciprocal method

D) sequential method

5) Under which allocation method are one-way reciprocal support services recognized?

A) direct method

B) artificial cost method

C) reciprocal method

D) step-down method