ABC Corporation has three service departments with the following costs and activ

Question

ABC Corporation has three service departments with the following costs and activity base: Service Department Graphics Production Accounting Personnel Department Cost $200,000 $500,000 $400,000 Activity Base for Allocation #of copies # of invoices processed # 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 70,000 $100,000 30,000 50,000 500 125 Director rating Expenses ,t 50,000 # of copies made 20,000 700 130 # invoices processed 800 145 How much service department cost would be allocated to the Macro Division? 0 a. S305.000 0 b. $130,000 Oc. $405,000 O d,$175,000

Explanation / Answer

Computation of Activity rate for each activity Activities Cost Driver Activity Pool Cost Pool Overhead Rate No. of Activity Macro Division Cost Allocated to Macro Division Graphics Production No. of Copies 100000 $200,000 $2 30000 $60,000 Accounting No. of Invoiced Processed 2000 $500,000 $250 800 $200,000 Personnel Department No. of Employees 400 $400,000 $1,000 145 $145,000 Total $405,000 Hence Service Department cost allocated to the Macro Division will be $405000

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