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 $45,900, and the Purchasing Department had expenses of $19,360 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $ 405,000 $ 536,000 $ 1,231,000 Number of employees: Weekly payroll (52 weeks per year) 145 60 65 Monthly payroll 32 43 30 Number of purchase requisitions per year 1,900 1,300 1,200 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. Do not round your interim calculations, round your answers to two decimal places, if required. Service department charge rates: Payroll Department $ per payroll check Purchasing Department $ per purchase requisition Residential Commercial Government Contract Total Service department charges: Payroll Department $ $ $ $ Purchasing Department Total $ $ $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Service Department Charges

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 $45,900, and the Purchasing Department had expenses of $19,360 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

	Residential	Commercial	Government Contract
Sales	$ 405,000		$ 536,000		$ 1,231,000
Number of employees:
	Weekly payroll (52 weeks per year)	145		60		65
	Monthly payroll	32		43		30
Number of purchase
	requisitions per year	1,900		1,300		1,200

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. Do not round your interim calculations, round your answers to two decimal places, if required.

Service department charge rates:
Payroll Department	$ per payroll check
Purchasing Department	$ per purchase requisition

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

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