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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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