24) 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.
14.4 Evaluate and select among three cost allocation methods for a product-sustaining inventoriable period cost and a facilities-sustaining period cost.
1) The direct allocation method ignores any services rendered between support departments.
2) The step-down allocation method allows partial recognition of services rendered by support departments to other support departments.
3) The reciprocal allocation method does not incorporate interdepartmental relationships fully into the support department cost allocations.
4) The direct allocation method provides key information for outsourcing decisions regarding support services.
5) The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.
6) The reciprocal method of support department cost allocation is the most precise method and therefore is used most often.
7) To discourage excessive use of a support department, management might
A) not allocate any costs of the support departments.
B) allocate costs based on user department usage.
C) allocate a fixed amount to each department regardless of use.
D) expense fixed costs of support departments directly to the income statement.
E) create special accounting records for the support department.