5. 6. ABC Corporation has three service departments with the following costs and

Question

5. 6. ABC Corporation has three service departments with the following costs and activity base: 8. 9.0 Accounting 10.G OService Department Cost $200,000 $500,000 $400,000 Activity Base for Allocation Graphics Production # of copies # of invoices processed # of employees Personnel Department 1ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity infomation are as follovs: 12. O 13 14. Micro Macro Super Direct Revenues $700,000 $850,000 $650,000 Direct Operating Expenses 50,000 $ 70,000 $100,000 20,00030,000 50,000 500 011 , # of copies made # invoices processed # of employees 700 130 800 145 125 What wil the inecorme of the SuerDistonbe rall eri llocations? a, $ 300,000 b. $550,000 c. $200,000 d 5325,000

Explanation / Answer

Ans: c -    $200000 Calculation of the income of the super division after all service department allocation: Direct revenue $ 650,000.00 Direct operating expenses $(100,000.00) Graphics production cost $(100,000.00) Account cost $(125,000.00) Personnel department cost $(125,000.00) Net income $ 200,000.00 *Graphics production cost = 200000/(20000+30000+50000)*50000 $ 100,000.00 *Accounting cost = 500000/(700+800+500)*500 $ 125,000.00 *Personnel department = 400000/(130+145+125)*125 $ 125,000.00

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