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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 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
Handheld Technology support Number of handheld devices 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.

 •    Almost all office employees (99%) 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 1.2 calls per individual with a computer.

 •    There are 600 additional printers, servers, and peripherals on the network beyond the personal computers.

 •    All the nonoffice employees have been issued a handheld device.

 a.    Determine the service charge rate for the four CCS service categories for October.

 b.    Determine the charges to the COMM sector for the four CCS service categories for October.

(a)

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 compute: The service charge rate to be charged to each CCS service category for the month of October

Explanation

Compute the service charge rate to be charged to helpdesk CCS service category for the month of October.

Service charge rate = Service department expenseService department usage=Helpdesk expensesNumber of calls used$160,0003,200 calls= $50 per call

Compute the service charge rate to be charged to network center CCS service category for the month of October.

Service charge rate = Service department expenseService department usage=Network center expensesNumber of devices monitored$735,0009,800 devices monitored= $75 per device monitored

Compute the service charge rate to be charged to electronic mail CCS service category for the month of October

(b)

To determine

To compute: The service department charges to be charged to each CCS service category for the month of October

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