Reference no: EM132467404

Question 1: Budgeted amounts of allocation bases, rather than actual amounts, are preferable allocation bases because:

Point 1 when actual amounts are used the behaviour of one responsibility centre affects the costs allocated to other responsibility centres.

Point 2 budgeted amounts are known in advance, therefore costs are easier to allocate.

Point 3 the use of actual amounts could cause fluctuations in the prices charged for a company's products or services.

Point 4 budgeted amounts are known in advance, therefore costs are easier to allocate AND the use of actual amounts could cause fluctuations in the prices charged for a company's products or services.