When allocating service department costs, companies should use: actual costs rather than budgeted costs, and a rate that combines variable and fixed costs. a rate that is based on matrix theory. budgeted costs rather than actual costs, and separate rates for variable and fixed costs. actual costs rather than budgeted costs, and separate rates for variable and fixed costs. budgeted costs rather than actual costs, and a rate that combines variable and fixed costs.

Budgeted costs rather than actual costs, and separate rates for variable and fixed costs.

Explanation:

When allocating service department costs, companies should use budgeted costs rather than actual costs, and separate rates for variable and fixed costs.

This is because the Allocation of Actual Amounts allows for Service Departments to be able to pass on the cost of their inefficiencies as well as their waste to Production Departments meaning that things will not be properly accounted for.

Separate rates for Variable and Fixed Costs are also encouraged to enabled for more accurate Accounting to the apportioning of costs to the Service Departments.

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