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 $63,492, and the Purchasing Department had expenses of $26,840 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $561,000 $743,000 $1,707,000 Number of employees: Weekly payroll (52 weeks per year) 205 85 90 Monthly payroll 36 47 34 Number of purchase requisitions per year 2,600 1,800 1,700 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Residential Commercial Government Contract Total Number of payroll checks: Weekly payroll Monthly payroll Total Number of purchase requisitions per year: b. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. If required, round your answers to two decimal places. Do not round your interim calculations, round your answers to two decimal places, if required. Service department charge rates: Payroll Department Purchasing Department Residential Commercial Government Contract Total Service department charges: Payroll Department Purchasing Department Total c. Residential's service department charge is higher than the other two divisions because Residential is a heavy user of service department services. Residential has many employees on a weekly payroll, which translates into a larger number of check-issuing transactions.

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 $63,492, and the Purchasing Department had expenses of $26,840 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $561,000 $743,000 $1,707,000 Number of employees: Weekly payroll (52 weeks per year) 205 85 90 Monthly payroll 36 47 34 Number of purchase requisitions per year 2,600 1,800 1,700 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Residential Commercial Government Contract Total Number of payroll checks: Weekly payroll Monthly payroll Total Number of purchase requisitions per year: b. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. If required, round your answers to two decimal places. Do not round your interim calculations, round your answers to two decimal places, if required. Service department charge rates: Payroll Department Purchasing Department Residential Commercial Government Contract Total Service department charges: Payroll Department Purchasing Department Total c. Residential's service department charge is higher than the other two divisions because Residential is a heavy user of service department services. Residential has many employees on a weekly payroll, which translates into a larger number of check-issuing transactions.

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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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 $63,492, and the Purchasing Department had expenses of $26,840 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

	Residential	Commercial	Government Contract
Sales	$561,000		$743,000		$1,707,000
Number of employees:
	Weekly payroll (52 weeks per year)	205		85		90
	Monthly payroll	36		47		34
Number of purchase
	requisitions per year	2,600		1,800		1,700

a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.

	Residential	Commercial	Government Contract	Total
Number of payroll checks:
Weekly payroll
Monthly payroll
Total
Number of purchase requisitions per year:

b. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. If required, round your answers to two decimal places. Do not round your interim calculations, round your answers to two decimal places, if required.

Service department charge rates:
Payroll Department
Purchasing Department

	Residential	Commercial	Government Contract	Total
Service department charges:
Payroll Department
Purchasing Department
Total

c. Residential's service department charge is higher than the other two divisions because Residential is a heavy user of service department services. Residential has many employees on a weekly payroll, which translates into a larger number of check-issuing transactions.

Expert Solution

Step 1 Part (a)

	Residential	Commercial	Government Contract	Total
*No. of payroll checks:*
Weekly Payroll [no of employees x 52]	10,660	4,420	4,680
Monthly payroll [no of employees x 12]	432	564	408
Total	11,092	4,984	5,088	21,164
*No. of purchase requisititon per year*	2,600	1,800	1,700	6,100

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