The service department will determine its service department charge rate and charge the company's divisions or departments according to their use of that particular service department.

Question

Quizplus · Accepted Answer

This is a common practice in cost accounting, where service department costs are allocated to other departments based on their usage. The service department charge rate is determined by dividing the total service department costs by the estimated usage, such as machine hours or labor hours. This charge rate is then applied to the other departments based on their actual usage of the service department.

The Service Department Will Determine Its Service Department Charge Rate