7. ABC Corporation has three service departments with the following costs and ac

Question

7. 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 Personnel Department?
a. $2,758
b. $3,200
c. $3,077
d. $1,000
Answer: _____

Explanation / Answer

service department charge rate for the Personnel Department=cost/no. of employees 400000/400=$1000

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