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	$99,320		2,600
Network center	Number of devices monitored	535,575		9,650
Electronic mail	Number of user accounts	78,650		7,150
Smartphone support	Number of smartphones issued	160,160		9,100

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 3,000 employees, of whom 40% are office employees.

• All the office employees have been issued a smartphone, and 90% of them have a computer on the network.

• 90 percent of the employees with a computer also have an e-mail account.

• The average number of help desk calls for October was 1 call per individual with a computer.

• There are 320 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. 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 user or e-mail account
Smartphone support	$ Per smartphone issued

b. Determine the charges to the COMM sector for the four CCS service categories for October. Round your answers to the nearest dollar amount.

October charges to the COMM sector:
Help desk charge	$
Network center charge	$
Electronic mail charge	$
Smartphone support charge	$

Answer 1

a. Determine the service charge rate for the four CCS service categories for October. Round your answers to two decimal places.

Help desk =$99,320/2,600= $38.2 per call

Network center= $535,575/9,650=55.5 per device monitored

Electronic mail = $78,650/7,150=11per e-mail account

Smartphone support= $160,160/9,100=17.6per smartphone issued

b. Determine the charges to the COMM sector for the four CCS service categories for October. Round your answers to the nearest dollar amount.

Help desk charge: (3,000 employees × 40% × 90% × 1.0) × $38.2/call = $41256

Network center charge: [(3,000 employees × 40% × 90%) + 320] × $55.50/device = $77700

Electronic mail: (3,000 employees × 40% × 90% × 90%) × $11/e-mail account = $10692

Smartphone support: (3,000 employees × 40%) × $17.60/phone extension = $21120

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