Accounting 25th Edition by Carl Warren, James Reeve, Jonathan Duchac

Exercise 2

Service department charges
The Customer Service Department of Door Industries Inc. asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was 25% higher than could be obtained from an outside printing company. The policy of the company required the Customer Service Department to use the internal publications group for brochures. The Publications Department claimed that it had a drop in demand for its services during the fiscal year, so it had to charge higher prices in order to recover its payroll and fixed costs.
Should the cost of the brochure be transferred to the Customer Service Department in order to hold the Customer Service Department head accountable for the cost of the brochure What changes in policy would you recommend