Service Department ChargesIn divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of the numberof payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Departmenthad expenses of $52,140, and the Purchasing Department had expenses of $23,760 for the year. The following annual data for Residential, Commercial, andGovernment Contract divisions were obtained from corporate records:GovernmentResidential CommercialContractSales$497,000$658,000$1,511,000Number of em ployees:Weekly payroll (52 weeks per year)1358590Monthly payroll324330Number of purchaserequisitions per year2,3001,6001,500a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.GovernmentResidentialCommercialTotalContractNumber of payroll checks:Weekly payrollMonthly payrollTotal TotalNumber of purchase requisitions peryearb. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, andGovernment Contract divisions from payroll and purchasing services. If required, round your answers to two decimal places. Do not round your interimcalculations, round your answers to two decimal places, if required.Service department charge rates:$payroll distributionPayroll DepartmentPurchasing Departmentper requisitionResidentialCommercialTotalGovernment ContractService department charges:$Payroll DepartmentPurchasing DepartmenthigherlowerTotalc. Residential's service department charge isthan the other two divisions because Residential is auser ofnumber of check-issuingservice department services. Residential has many employees on a weekly payroll, which translates into atransactions

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Asked Nov 2, 2019
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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 $52,140, and the Purchasing Department had expenses of $23,760 for the year. The following annual data for Residential, Commercial, and
Government Contract divisions were obtained from corporate records:
Government
Residential Commercial
Contract
Sales
$497,000
$658,000
$1,511,000
Number of em ployees:
Weekly payroll (52 weeks per year)
135
85
90
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
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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 $52,140, and the Purchasing Department had expenses of $23,760 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Government Residential Commercial Contract Sales $497,000 $658,000 $1,511,000 Number of em ployees: Weekly payroll (52 weeks per year) 135 85 90 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

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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 distribution
Payroll Department
Purchasing Department
per requisition
Residential
Commercial
Total
Government Contract
Service department charges:
$
Payroll Department
Purchasing Department
higher
lower
Total
c. Residential's service department charge is
than the other two divisions because Residential is a
user of
number of check-issuing
service department services. Residential has many employees on a weekly payroll, which translates into a
transactions
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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 distribution Payroll Department Purchasing Department per requisition Residential Commercial Total Government Contract Service department charges: $ Payroll Department Purchasing Department higher lower Total c. Residential's service department charge is than the other two divisions because Residential is a user of number of check-issuing service department services. Residential has many employees on a weekly payroll, which translates into a transactions

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Expert Answer

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Step 1

Total number of weekly checks can be determined by multiplying the number of employees with number of weeks i.e. 52. Similarly, total number of monthly checks can be determined by multiplying number of monthly employees with number of months in a year i.e.12.

The total number of checks of payroll department and purchase requisition of purchase department have been computed as below

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Government Commercial Total Residential Contract a Number of payroll checks Weekly payroll (Number of Employees*52) 7020 4420 4680 384 Monthly payroll (Number of Employees*12) 516 360 7404 Total 4936 5040 17380 Number of Purchase requisitions per year 2300 1600 1500 5400

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Step 2

b. The cost per check of payroll department is computed by dividing the total cost of service department by the total number of checks. This cost per check is multplied with number of checks of each department to arrive at the service cost of payroll allocated to the departments.  Similar pr...

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Explanation per payroll 3.00 distribution (52140/17380) 4.40 per requisitior (23760/5400) Payroll Department= Purchasing department= Government Commercial Total Residential Contract Service department charges 22212 Payroll Department 14808 15120 52140 Purchasing Department 10120 7040 6600 23760 32332 Total 21720 21848

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