ABC Corporation Has Three Service Departments with the Following Costs

question 171

Multiple Choice

ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows:
What is the service department charge rate for the Personnel Department?

• A) $2,758
• B) $3,200
• C) $3,077
• D) $1,000

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Definitions:

Divisional Managers

Managers who are responsible for overseeing the operations, profitability, and strategic planning of a specific division within a company.

Transfer Price

The price at which goods and services are traded between departments or subsidiaries within the same company, used for accounting and tax purposes.

Applied Fixed Overhead

Costs for fixed overhead (such as rent, salaries, and utilities) that are allocated to goods produced based on a predetermined rate.

Full Capacity

The maximum level of output that a company can sustain over a period of time using its current resources, without compromising quality or efficiency.