Question

In allocating the cost of a support department, single charging rate:

a.computed by treating the fixed costs as variable costs.
b.based solely on the fixed costs.
c.allocates the producing department costs to the support departments.
d.changes with the change in the usage of the support department.

Answer 1

In allocating the cost of a support department, the single charging rate typically treats all costs as variable, allowing the allocation to change with the usage of the support department.

Step-by-step explanation:

The question revolves around the concept of allocating the cost of a support department using a single charging rate. In this context, costs are traditionally divided into fixed costs and variable costs. Fixed costs, such as rent for a factory, remain constant regardless of the production level, while variable costs change with production levels. However, when using a single charging rate to allocate support department costs, it might simplify the process by treating all costs as variable to reflect the usage of the support departments by the producing departments. Therefore, the single charging rate can change with the usage of the support department.

For example, if the support department provides maintenance services, the less the production department uses these services, the lower the allocated costs would be under a single charging rate method. This approach can lead to more accurate cost allocation and help in better managerial decision-making regarding resources utilization.