Abc corporation has three support departments with the following costs and cost drivers: support department cost cost driver graphics production $200,000 number of copies made accounting 500,000 number of invoices processed personnel 400,000 number of employees abc has three operating divisions, micro, macro, and super. their revenue, cost, and activity information are as follows: micro macro super revenues $700,000 $850,000 $650,000 direct operating expenses 50,000 70,000 100,000 number of copies made 20,000 30,000 50,000 number of invoices processed 700 800 500 number of employees 130 145 125 the support department allocation rate for the accounting department is

The allocation rate for the accounting department is $250.

Further Explanation:

Cost allocation:

Cost allocation refers to the process of allocating the cost of the business to the various departments. The management of the company has to calculate the cost incurred by each department. There are some expenses which are incurred collectively, so the management has to allocate the common cost to the various departments. The allocation of the cost should be done in a manner of the utilization of the expenses or cost by that specific department.

Calculate the support department allocation rate for the accounting department:

The allocation of the accounting department cost will be made on the basis of number of invoices processed.  The services of accounting department are used for the preparation of the invoices. So, the cost of accounting will be allocated on the basis of the number of invoices.

Calculate the allocation rate for the accounting department:

Thus, the allocation rate for the accounting department is $250 per invoice.

Working Note:

Calculate the total number of invoices processed:

The total number of invoices is 2,000.

Learn more:

1.  Learn more about the percentage of sales method

2.  Learn more about the manufacturing cost

3.  Learn more about the average cost per unit

Answer details:

Grade: Senior School

Subject: Cost Accounting

Chapter: Activity-Based Costing

Keywords:  Activity-Based Costing, Costing, Cost accounting, Allocation of cost, Cost allocation, Fixed costing, Variable costing, Departmental costing, Accounting, Direct expenses, Indirect expenses, Cost, ABC costing.

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