Service Department Charges In divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $30,600, and the Purchasing Department had expenses of $15,660 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Government Residential Commercial Contract Sales $327,000 $434,000 $996,000 Number of employees: Weekly payroll (52 weeks per year) 135 65 70 Monthly payroll 32 43 30 Number of purchase requisitions per year 2,300 1,600 1,500 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Government Residential Commercial Total Contract Number of payroll checks: Weekly payroll Monthly payroll Total Number of purchase requisitions per year:

Service Department Charges In divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $30,600, and the Purchasing Department had expenses of $15,660 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Government Residential Commercial Contract Sales $327,000 $434,000 $996,000 Number of employees: Weekly payroll (52 weeks per year) 135 65 70 Monthly payroll 32 43 30 Number of purchase requisitions per year 2,300 1,600 1,500 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Government Residential Commercial Total Contract Number of payroll checks: Weekly payroll Monthly payroll Total Number of purchase requisitions per year:

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 5E: Service department charges In divisional income statements prepared for Demopolis Company, the...

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A company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950
Championship Sports Inc. operates two divisionsthe Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: The bases to be used in allocating expenses, together with other information, are as follows: a. Advertising expenseincurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, 375,000; Summer Sports Division, 715,000. b. Transportation expenseallocated to divisions at a rate of 4.00 per bill of lading: Winter Sports Division, 17,500 bills of lading; Summer Sports Division, 30,500 bills of lading. c. Accounts receivable collection expenseincurred at headquarters, allocated to divisions at a rate of 1.00 per invoice: Winter Sports Division, 25,000 sales invoices; Summer Sports Division, 43,000 sales invoices. d. Warehouse expenseallocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 60,000 square feet; Summer Sports Division, 90,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting computations for support department allocations.
Divisional performance analysis and evaluation The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instructions 1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations. 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. Round percentages and the investment turnover to one decimal place. 3. If managements minimum acceptable return on investment is 10%, determine the residual income for each division. 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).
Profit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the companys point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is a cost driver for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is a cost driver for this work. The following additional information has been gathered: Instructions 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: East, West, and Central. 2. Identify the most successful division according to the profit margin. Round to the nearest whole percent. 3. Provide a recommendation to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness of the present method.
Classify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS): a. Determining the total compensation of the CEO of a public company b. Issuing a quarterly earnings report c. Determining the unit product cost using TDABC d. Calculating the number of units that must be sold to break even e. Preparing a required report for the SEC f. Preparing a sales budget g. Using cost and revenue information to decide whether to keep, or drop, a product line h. Preparing an annual statement of financial position that conforms to generally accepted accounting principles (GAAP) i. Using cost and revenue information to decide whether to invest in a new production system or not j. Reducing costs by improving the overall quality of a product k. Using a debt-equity ratio and liquidity ratios from a balance sheet to assess the likelihood of bankruptcy l. Using a public companys financial statements to decide whether or not to buy its stock
Profit center responsibility reporting On-Demand Sports Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of November 30. 20Y1, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded The bases to be used in allocating expenses, together with other essential information, are as follows a.Advertising expense—incurred al headquarters, charged back to divisions on the basis of usage: Action Sports Division. $1,200,000; Team Sports Division, $1,800,000. b. Transportation expense—charged hack lo divisions at a charge rale of $18.50 per bill of lading: Action Sports Division, 14.000 bills of lading; Team Sports Division. 21.400 bills of lading. C. Accounts receivable collection expense—incurred al headquarters, charged back to divisions at a charge rate of $9-00 per invoice: Action Sports Division. 32.000 sales invoices; Team Sports Division, 12.500 sales invoices. d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Action Sports Division. 120.000 square feet; Team Sports Division. 80.000 square feet. Prepare divisional income statements with two column headings: Action Sports Division and Team Sports Division. Provide supporting schedules for determining service department charges.
COMPUTING OPERATING INCOME The sales, cost of goods sold, and total operating expenses of departments A and B of Ash Company are as follows: Compute the departmental operating income for each department.
Corrections to service department charges Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared The service department charge rate for the service department costs was based on revenues. The following additional information is available a.Does the operating income for the two divisions accurately measure performance? b.Using service charge rates for service department charges, correct the divisional income statements.
INCOME STATEMENT WITH DEPART MENTAL GROSS PROFIT AND OPERATING INCOME Thomas and Hill Distributors has divided its business into two departments: commercial sales and industrial sales. The following information is provided for the year ended December 31, 20--: REQUIRED 1. Prepare an income statement showing departmental gross profit and total operating income. 2. Calculate departmental gross profit percentages.