Service Department Charges and Activity Bases Middler Corporation, a manufacture
ID: 2450433 • Letter: S
Question
Service Department Charges and Activity Bases
Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October.
CCS Service
Category
Activity Base
Budgeted Cost
Budgeted Activity
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.
One hundred percent of the employees with a computer also have an e-mail account.
The average number of help desk calls for October was 1.5 calls per individual with a computer.
There are 600 additional printers, servers, and peripherals on the network beyond the personal computers.
a. Determine the service charge rate for the four CCS service categories for October.
CCS Service Category
Service Charge Rate
Help desk
$
Network center
$
Electronic mail
$
Local voice support
$
b. Determine the charges to the COMM sector for the four CCS service categories for October.
October charges to the COMM sector
Help desk charge
$
Network center charge
$
Electronic mail charge
$
Local voice support charge
$
CCS Service
Category
Activity Base
Budgeted Cost
Budgeted Activity
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
Explanation / Answer
a.
Service charge rate = Budgeted cost / Budgeted quantity
H.D
$160,000 / 3,200 =
$50
N.C
$735,000 / 9,800 =
$75
E.M
$100,000 / 10,000 =
$10
L.S
$124,600 / 8,900 =
$14
b.
Service charge to COM
Category
Rate (R)
Quantity (Q)
Amount (R × Q)
H.D
$50
5200 × 25% × 96% × 1.5 = 1,872 calls
$93,600
N.C
$75
(5,200 × 25%) + 600 = 1,900 devices
$142,500
E.M
$10
5,200 × 25% × 96% = 1,248 accounts
$12,480
L.S
$14
5,200 × 25% = 1,300 phones
$18,200
$266,780
H.D
$160,000 / 3,200 =
$50
N.C
$735,000 / 9,800 =
$75
E.M
$100,000 / 10,000 =
$10
L.S
$124,600 / 8,900 =
$14
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