Service Department Charges and Activity Bases Middler Corpor

Service Department Charges and Activity Bases

Middler 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 October.

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

The sector has 5,200 employees, of whom 25% are office employees.

Almost all office employees (99%) have a computer on the network.

One hundred percent of the employees with a computer also have an e-mail account.

The average number of help desk calls for October was 1.2 calls per individual with a computer.

There are 600 additional printers, servers, and peripherals on the network beyond the personal computers.

All the nonoffice employees have been issued a handheld device.

a. Determine the service charge rate for the four CCS service categories for October.

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

CCS Service Category	Activity Base	Budgeted Cost	Budgeted Activity Base Quantity
Help desk	Number of calls	$160,000		3,200
Network center	Number of devices monitored	735,000		9,800
Electronic mail	Number of user accounts	100,000		10,000
Handheld Technology support	Number of handheld devices issued	124,600		8,900

Solution

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Hhelp Desk per call 160000 3200 50 per call Network Center Per device 735,000 9,800 75 per device monitores Electronic Mail Pere useer 100,000 10,000 10 per user Handheld technology Per device 124,600 8,900 14 per device Number of Employees 5200 office employees 1300 Non-Office employees 3900 Number of Computers (1300*99%) 1287 Number of Email account 1287 Number of handheld devices 3900 Number of devices monitored 1887 (1287+600) Number of calls (1287*1.2) 1544.4 Activity cost: Activity   Drivers Rates Activity cost Hhelp Desk 1544.4 calls 50 77220 Network Center 1887 devices 75 141525 Electronic Mail 1287 accounts 10 12870 Handheld technology 3900 dvice 14 54600 Total activity cost 286215