Final answer:
Option a- True is correct answer.The statement that organizations use budgeted rates to assign both direct and indirect costs to jobs under some variations of normal costing is true.
Step-by-step explanation:
The student has asked whether in some variations of normal costing, organizations use budgeted rates to assign not only indirect costs but also direct costs to jobs. The answer to this is true.
Normal costing traditionally utilizes actual direct labor, actual direct materials, and a predetermined overhead rate to assign costs. However, some organizations opt to use budgeted rates for both direct and indirect costs for more stable cost management and budgeting purposes. The budgeted rates can reduce variances that emerge from actual rates being significantly different from budgeted amounts, thereby providing a more consistent basis for pricing, planning, and control.
Understanding the composition of total costs through the breakdown into fixed cost, marginal cost, average total cost, and average variable cost is beneficial for firms. These cost measures provide insight into the cost behavior and are essential for managerial decision-making. For example, the fixed cost remains constant irrespective of the output level, as seen in the fixed costs of operating a barber shop, which do not change with the level of production. On the other hand, variable costs vary with production, such as the costs of hiring barbers based on the number of haircuts provided.
The numerical calculations of average cost, average variable cost, and marginal cost will vary from business to business, but the patterns and economic principles behind these costs are generally consistent. These costs analyses are vital for evaluating efficiency, making pricing decisions, and planning production levels.