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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Service department charges

 The centralized employee travel department of Croce Company has expenses of $724,000. The department has serviced a total of 5,000 travel reservations for the period. The South Division has made 2,850 reservations during the period, and the West Division has made 2,150 reservations. How much should each division he charged for travel services?

To determine

Service department charges: These are the indirect expenses incurred by profit center. These are charged for the services received by the department or division, based on the activity base of the service department.

To determine: The travel service charges to be charged for S Division and W Division

Explanation

Determine the service charges to be charged for travel department of S Division.

Travel service charges = {Number of billed reservations of S Division× Rate per billed reservation}={Number of billed reservations of S Division × Travel department expensesTotal number of travel reservations}= 2,850 reservations × $724,0005,000 reservations= $412,680

Determine the service charges to be charged for travel department of W Division

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