Service Department Charges and Activity Bases Middler Corporation, a manufacturer of electronics and communications systems, uses...

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	$110,550	3,300
Network center	Number of devices monitored	610,000	10,000
Electronic mail	Number of user accounts	45,200	5,650
Handheld technology support	Number of handheld devices issued	120,320	9,400

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 5,000 employees, of whom 30% are office employees.

Almost all office employees (80%) 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 calls per individual with a computer.

There are 280 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. Round your answers to two decimal places.

CCS Service Category	Service Charge Rate
Help desk	$
Network center	$
Electronic mail	$
Handheld technology 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	$
Handheld technology support	$

Solutions

Expert Solution

1.Calculation of activity rate using cost driver.
a.Calculation of cost driver
Particular	Help Desk	Network center	Electronic mail	Local voice support
A.Overhead incurred	$110,550	610,000	45,200	120,320
B.Driver	Number of calls	Number of devices monitored	Number of user accounts	Number of phone extension
C.No. of times an activity is performed	3300	10000	5650	9400
D.Cost driver (A/C)	33.5	61	8	12.8
	per call	per device monitored	per employee	per phone extension

Calculation of total costs of COMM sector
Partciulars		Amount	Cost
Total employee	5000
office employee (30% of 5000)	1500
Phone (all office employee)	1500		12.8*1500
Computer network(80% of offfice employe)	1200		61*1200
Email account (90% of office employee with computer)	1080		8*1080
Number of calls (1.0 per individual with computer)	1080		33.5*1080
Printers and other devices	280		61*280

2
October charges to COMM sector
Help desk charge	36180
Network center charge	90280
Electronic mail charge	8640
Local voice support charge	19200
Total	154300

ekkarill92 answered 2 years ago

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