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: Activity Base for Allocation Cost $200,000 $500,000 Service Department of copies Accounting Personnel Department $400,000 #0 # 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 Direct Operating Expenses 50,000 70,000 100,000 50,000 500 125 # of copies made # invoices processed # of employees 30,000 800 145 20,000 700 130 What will the income of the Super Division be after all service department allocations? a. $200,000 b.$300,000 0 c. $325,000 d. $550,000

Explanation / Answer

Super Direct revenue 650000 Expenses: Direct operating expenses 100000 Graphics department 100000 =200000/(20000+30000+50000)*50000 Accounting 125000 =500000/(700+800+500)*500 Personnel department 125000 =400000/(130+145+125)*125 Total Expenses 450000 Income 200000 Option A is correct

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