3. In divisional income statements prepared for Demopolis 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 $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks a year) Monthly Payroll Number of purchase requisitions per year 410 210 160 75 35 15 7,400 3,000 2,000 a. Determine the total dollar amount of payroll checks and purchase requisitions processed per year by the company and each division. b. Using the activity base information in (a), determine the annual dollar amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. c. Why does the Residential Division have a larger service department charge than the other two divisions, even though its solo lowor?
3. In divisional income statements prepared for Demopolis 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 $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks a year) Monthly Payroll Number of purchase requisitions per year 410 210 160 75 35 15 7,400 3,000 2,000 a. Determine the total dollar amount of payroll checks and purchase requisitions processed per year by the company and each division. b. Using the activity base information in (a), determine the annual dollar amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. c. Why does the Residential Division have a larger service department charge than the other two divisions, even though its solo lowor?
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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Transcribed Image Text:3. In divisional income statements prepared for Demopolis
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
$64,560, and the Purchasing Department had expenses of
$40,000 for the year. The following annual data for
Residential, Commercial, and Government Contract
divisions were obtained from corporate records:
Residential Commercial
Government
Contract
Sales
$2,000,000
$3,250,000
$2,900,000
Number of employees:
Weekly payroll (52 weeks a year)
Monthly Payroll
Number of purchase requisitions per year
410
210
160
75
35
15
7,400
3,000
2,000
a. Determine the total dollar amount of payroll checks and
purchase requisitions processed per year by the company
and each division.
ing the activity base information in (a), determine the
annual dollar amount of payroll and purchasing costs
charged back to the Residential, Commercial, and
Government Contract divisions from payroll and
purchasing services.
c. Why does the Residential Division have a larger service
department charge than the other two divisions, even
though its sales are lower?
b.
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