Question

For performance evaluation purposes, the fixed costs of a service department should be charged to operating departments using: Multiple Choice actual fixed costs and the peak-period or long-run average servicing capacity. budgeted fixed costs and the peak-period or long-run average servicing capacity. actual fixed costs and the budgeted level of activity for the period. budgeted fixed costs and the actual level of activity for the period.

Answer 1

The budgeted variable rate and the actual level of activity for the period.

Explanation:

The budgeted variable rate and the actual level of activity for the period. The budgeted rate times the actual level of activity tells you how much you SHOULD have spent on the activity which will allow you to evaluate how good or bad the performance was for each period. (For performance evaluation, the variable costs of service department should be charged to operating departments using predetermined rates at normal circumstances (budgeted variable rate) at actual level of activity to obtain the results which can be compared with actuals)