ABC Corporation has three service departments with the following costs and activity base: Service Department Cost...

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Question

ABC Corporation has three service departments with the following costs and activity base: Service Department Cost...

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.$0.50

b.$6.66

c.$2.00

d.$10.00

business accounting

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Answer 1

Answer #1

Correct Option C i.e. $2.00

Calculation of service department charge rate for Graphics Production

Charge rate = estimated Graphic department cost / Total no. of copies
=200000 /100000
2.00

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Answer 2

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