ABC Corporation has three service departments with the following costs and activity base: Service Department Cost...

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ABC Corporation has three service departments with the following costs and activity base: Service Department Cost...

ABC Corporation has three service departments with the following costs and activity base:

Service Department	Cost	Activity Base for Allocation
Graphics Production	$200,000	number of copies
Accounting	500,000	number of invoices processed
Personnel Department	400,000	number of employees

ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows:

	Micro	Macro	Super
Direct revenues	$700,000	$850,000	$650,000
Direct operating expenses	50,000	70,000	100,000
Number of copies made	20,000	30,000	50,000
Number of invoices processed	700	800	500
Number of employees	130	145	125

How much service department cost will be allocated to the Micro Division?

a.$145,000

b.$60,000

c.$345,000

d.$200,000

business accounting

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Answer 1

Answer #1

OPTION d: 345000

EXPLANATION:

Total service department cost to be allocated to Micro Division:

Particulars	Amount
Graphic production cost - based on number of copies made	$200000 x (20000/100000) = $40000
Accounting cost - baseed on number of invoices processed	$500000 x (700/2000) = $175000
Personnel Department cost - based on number of employees	$400000 x (130/400) = $130000
Total	$345000

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Answer 2

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