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 number of copies Accounting 500,000 number of invoices processed Personnel Department 400,000 number 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 Number of copies made 20,000 30,000 50,000 Number of invoices processed 700 800 500 Number of employees 130 145 125 What is the service department charge rate for Graphics Production?
a.$2.00
b.$6.66
c.$0.50
d.$10.00

Answer 1

Answer:

a. $2.00

Explanation:

Lets summarize information first

Service department

Graphics production $200,000, allocated by number of copies

Accounting $500,000, allocated by number of invoices

Personal Department $400,000, allocated by number of employees

Graphics department charge rate can be calculated as,

Graphic cost / print = Graphic cost / Total prints

Graphic cost / print = 200,000 / (20,000+30,000+50,000) = $2/print

Hope that helps