Service Department Charges and Activity Bases
Harold 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 April.
CCS Service Category |
Activity Base |
Budgeted Cost |
Budgeted Activity Base Quantity |
||
Help desk | Number of calls | $93,450 | 2,100 | ||
Network center | Number of devices monitored | 603,000 | 9,000 | ||
Electronic mail | Number of user accounts | 71,000 | 7,100 | ||
Local voice support | Number of phone extensions | 136,000 | 8,500 |
One of the profit centers for Harold Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:
a. Determine the service charge rate for the four CCS service categories for April. Round your answers to two decimal places.
CCS Service Category | Service Charge Rate |
Help desk | $ Per call |
Network center | $ Per device monitored |
Electronic mail | $ Per e-mail account |
Local voice support | $ Per phone extension |
b. Determine the charges to the COMM sector for the four CCS service categories for April.
April charges to the COMM sector: | |
Help desk charge | $ |
Network center charge | $ |
Electronic mail charge | $ |
Local voice support charge | $ |
Activity based costing is the modern approach to allocate overhead costs. | |||||
Under this method the cost allocation is made on the basis of various activity by calculating rate for each activity | |||||
CCS Service Category | Activity base | Budgeted cost | Budgeted activity base Quantity | Service charge rate | |
Help desk | Number of calls | $93,450 | 2,100 | $44.50 | per call |
Network center | Number of devices monitored | 603,000 | 9,000 | $67.00 | per device monitored |
Electronic mail | Number of user accounts | 71,000 | 7,100 | $10.00 | Per email account |
Local voice support | Number of phone extensions | 136,000 | 8,500 | $16.00 | Per phone extension |
Help desk charge = (5000 employees*30%*1*44.50) | $66,750 | ||||
Network center = ((5000 employees*30%*80%)+260)*67 | $97,820 | ||||
Electronic mail = (5000 employees*30%*80%*90%*10) | $10,800 | ||||
Local voice support = (5000 employees*30%*)*16 | $24,000 |
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