ABC Corporation has three service departments with the following costs and activ
ID: 2587864 • 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
What is the service department charge rate for the Accounting Department?
Question 19 options:
$250 per invoice processed
$714 per invoice processed
$0.004 per invoice processed
$625 per invoice processed
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
Explanation / Answer
The correct answer is :
$250 per invoice processed
Note :
Total Cost of the Accounting Department = $ 500,000
Number of Invoices Processed in Total = 700 +800 +500
= 2,000
Hence, service department charge rate for the Accounting Department =
=Total Cost of the Accounting Department /Number of Invoices Processed in Total
= $ 500,000 /2000
= $ 250 per invoice processed.