COMMERCE 2AB3 Study Guide - Final Guide: Fixed Cost, Variable Cost, Transaction Account

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2AB3
• Professor: Karim Karim

Document Summary

The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool. The dual cost-allocation method classifies costs into two pools, a variable cost pool and a fixed cost pool. Difficulty: 1: using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility. The single-rate cost-allocation method provides better information for decision making than the dual-rate method. The dual-rate cost-allocation method provides better information for decision making than the single-rate method. Difficulty: 2: when budgeted cost-allocation rates are used, user-division managers face uncertainty about the allocation rates for that budget period. When budgeted cost-allocation rates are used, user-division managers face no uncertainty about the allocation rates for that budget period. Difficulty: 2: when budgeted cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency. Answer: true: when budgeted cost-allocation rates are used, variations in actual usage by one division.