ABC Corporation has three service departments with the following costs and activ

Question

ABC Corporation has three service departments with the following costs and activity base:


ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows:

Service Department Cost Activity Base for Allocation Graphics Production $200,000 # of copies Accounting $500,000 # of invoices processed Personnel Department $400,000 # of employees Micro Macro Super Direct Revenues $700,000 $850,000 $650,000 Direct Operating Expenses $50,000 $70,000 $100,000 # of copies made 20,000 30,000 50,000 # invoices processed 700 800 500 # of employees 130 145 125 .

Explanation / Answer

cost per graphics production = 200000/(20000 + 30000 + 50000) =2

cost per invoice = 250

cost per employee = 1000

expenses of Macro department = 70000 + 30000 * 2 + 800 * 250 + 145 * 1000 = 475000

net income = revenue - expenses = 850000 - 475000 = 375000...ans

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