Service Costs

Entertainment 720 is an entertainment conglomerate, consisting of two departments: Sales Department, headed by Jean-Ralphio, and Event Planning, headed by Tom. Recently, E720 decided to hire an Accountant, Ben. They also have a corporate jet both for Event Planning and Accounting related travel. Jean-Ralphio, for reasons that might be obvious, is not allowed to use the corporate Jet.

Ben, having taken a managerial accounting class, decided to investigate the costs and structure associated with the service departments of Entertainment 720, which he decided were his Accounting department (costing $100,000 per year), and the Jet (costing $1,000,000 per year). The departments receive the following percentage of service:

The service costs are allocated based on the percentages shown. No other costs should be considered for this problem.

Sales Event Planning 40% 40% 75% Accounting 20% Jet $100,000 / yr $1,000,000 / yr 25%