Question

t ugil ils Sales are lower! EX 8-6 Service department charges and activity bases OBJ.3 Middler Corpo Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge pron munications Services (CCS) service department cos! ment charge system to charge profit centers with Computing and Com- abbreviated list of service categories and activity base ices (CCS) service department costs. The following table identifies an of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity Da es some assumed cost and activity base quantity information for each service for October. CCS Service Category Budgeted Activity Activity Base Budgeted Cost Base Quantity Help desk Number of calls $160,000 3,200 Network center Number of devices monitored 735,000 9,800 Electronic mail Number of user accounts 100,000 10,000 Smart phone support Number of smart phones issued 124,600 8,900 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: • The sector has 5,200 employees, of whom 25% are office employees. All the office employees have been issued a smart phone, and 96% of them have a computer on the network. (Continued)

Answer 1

Solution a:

Computation of Service Charge rate for CCS department - Middler Corporation
CCS Service Category	Budgeted Cost	Activity Base	Usage of Activity Base	Activity Rate
					Help Desk	$160,000.00	Number of Calls	3200	$50.00
Network Center	$735,000.00	Number of devices monitored	9800	$75.00
Electronic Email	$100,000.00	Number of user accounts	10000	$10.00
Smartphone support	$124,600.00	Nos of smartphones issued	8900	$14.00

Solution b:

October charges to COMM sector
CCS Service Category	Activity base	Quanity of activity Base		Activity Rate	Allocated charges
		Details	Quantity
Help Desk	Number of Calls	5200*25%*96%*1.50	1872	$50.00	$93,600.00
Network Center	Number of devices monitored	(5200*25%*96%)+600	1848	$75.00	$138,600.00
Electronic Email	Number of user accounts	5200*25%*96%*100%	1248	$10.00	$12,480.00
Smartphone support	Nos of smartphones issued	5200*25%	1300	$14.00	$18,200.00