Harold Corporation, a manufacturer of electronics and communications systems, us

Question

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.

One of the profit centers for Harold Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:

The sector has 4,000 employees, of whom 30% are office employees.

All the office employees have a phone, and 70% 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 April was 1 call per individual with a computer.

There are 300 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 April. Round your answers to two decimal places.

b. Determine the charges to the COMM sector for the four CCS service categories for April.

CCS Service
Category
Activity Base
Budgeted Cost Budgeted Activity
Base Quantity Help desk Number of calls $127,500 3,000 Network center Number of devices monitored 558,150 9,150 Electronic mail Number of user accounts 81,000 6,750 Local voice support Number of phone extensions 165,120 8,600

Explanation / Answer

Determine the service charge rate for the four CCS service categories for April.

Help desk = $127,500/3000 Calls = $42.5 per call

Network center = $558,150 / 9,150 Devices = $61 per device monitored

Electronic mail= $81,000 / 6,750 accounts = $12 per e-mail account

Local voice support: =$165,120 / 8,600 accounts = $19.2 per phone extension

Determine the charges to the COMM sector for the four CCS service categories for April

Help desk charge: (4,000 employees × 30% × 70% × 1.0) × $42.5/call = $35,700

Network center charge: [(4,000 employees × 30% × 70%) + 300] × $61/device = $69,540

Electronic mail: (4,000 employees × 30% × 70% × 90%) × $12/e-mail account = $9,072

Local voice support: (3,000 employees × 30%) × $19.2/phone extension = $17,280

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