ABC Corporation has three service departments with the following costs and activ
ID: 2483960 • Letter: A
Question
ABC Corporation has three service departments with the following costs and activity base: 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 ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: 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
Micro Macro Super Total Direct Revenues $ 700,000 $ 850,000 $ 650,000 $2,200,000 Direct Operating Expenses $ 50,000 $ 70,000 $ 100,000 $220,000 Graphics Production $ 40,000 $ 60,000 $ 100,000 $200,000 Accounting $ 175,000 $ 200,000 $ 125,000 $500,000 Personnel Department $ 130,000 $ 145,000 $ 125,000 $400,000 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 Total # of copies made 20,000 30,000 50,000 100,000 # invoices processed 700 800 500 2,000 # of employees 130 145 125 400 Graphics Production Allocation calculation 200,000*(20,000/100,000) 200,000*(30,000/100,000) 200,000*(50,000/100,000) Result $ 40,000 $ 60,000 $ 100,000 Accounting Allocation calculation 500000*(700/2,000) 500000*(800/2,000) 500000*(500/2,000) Result $ 175,000 $ 200,000 $ 125,000 Personnel Department Allocation calculation 400,000*(130/400) 400,000*(145/400) 400,000*(125/400) Result $ 130,000 $ 145,000 $ 125,000