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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.

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
Smartphone support Number of smartphones issued 124,600 8,900
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.

• All the office employees have been issued a smartphone, and 96% of them 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 1.5 calls per individual with a computer.

• There are 600 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 October.

CCS Service Category Service Charge Rate
Help desk $fill in the blank 1

Per call
Network center $fill in the blank 3

Per device monitored
Electronic mail $fill in the blank 5

Per user or e-mail account
Smartphone support $fill in the blank 7

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

October charges to the COMM sector
Help desk charge $fill in the blank 9
Network center charge $fill in the blank 10
Electronic mail charge $fill in the blank 11
Smartphone support charge $fill in the blank 12
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a. Divide the budgeted cost by the budgeted activity base quantity for each category.

b. Determine the Help desk charge by multiplying the rate from (a) by the number of employees times the percentage of office employees times the percentage with a computer times the number of calls. Follow a similar process for each of the other three categories.

Learning Objective 3.

Answer 1

The service charge rate are: Help desks $50 per call, Network center $75 per device monitored, Electronic mail $10 per user or per e-mail account, Local voice support $14 per phone extension.

Service charge rate

a. Service charge rate

Service charge rate=Budgeted cost/ Budgeted activity base quantity

Help desks:

Service charge rate=$160,000/3,200 calls

Service charge rate=$50 per call

Network center:

Service charge rate=$735,000/9,800 devices

Service charge rate=$75 per device monitored

Electronic mail:

Service charge rate=$100,000/10,000 accounts

Service charge rate=$10 per user or per e-mail account

Local voice support:

Service charge rate=$124,600/8,900 phone extensions

Service charge rate=$14 per phone extension

b.  Help desk charge

Help desk charge =(Number of employees times × Percentage of office employees× Percentage with a computer ×Number of calls)× Service charge rate

Help desk charge:

(5,200 employee×25%×96%×1.5)× $50 per call

=$93,600

Network center charge:

[(5,200 employee×25%×96%)+ 600]× $75 per device

=$138,600

Electronic mail:

(5,200 employee×25%×96%×100)×$10 per user or per e-mail account

=$12,480

Local voice support:

(5,200 employee×25%)× $14 per phone extension

=$18,200

Therefore the service charge rate are: Help desks $50 per call, Network center $75 per device monitored, Electronic mail $10 per user or per e-mail account, Local voice support $14 per phone extension.

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