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31 May, 10:19

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 the Personnel Department?

(A) $2,758

(B) $3,200

(C) $1,000

(D) $3,077

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Answers (1)
  1. 31 May, 10:26
    0
    (C) $1,000

    Explanation:

    The computation of the service department charge rate for the Personnel Department is shown below:

    = Personnel department : total number of employees

    = $400,000 : 400 employees

    = $1,000

    We simply divided the personnel department cost by the total number of employees

    The total number of employees is shown below:

    = 130 + 145 + 125

    = 400 employees

    All other information which is given is not relevant. Hence, ignored it
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