Service Department Allocations In divisional income statements prepared for Lemons Company, the Payroll Department costs are allocated to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are allocated on the basis of the number of purchase requisitions. The Payroll Department had costs of $41,664, and the Purchasing Department had expenses of $13,630 The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $285,000 $378,000 $867,000 Number of employees: Weekly payroll (52 weeks per year) 220 75 80 Monthly payroll 34 45 32 Number of purchase requisitions per year 2,000 1,400 1,300 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 cost driver information in (a), determine the annual amount of payroll and purchasing costs allocated back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. Do not round interim calculations. Service department allocation rates: Payroll Department Purchasing Department Residential Commercial Government Contract Total Service department allocations: Payroll Department Purchasing Department Total c. Residential's service department allocation is ? than the other two divisions because Residential is a ? user of service department services. Residential has many employees on a weekly payroll, which translates into a ? number of check-issuing transactions.

Service Department Allocations In divisional income statements prepared for Lemons Company, the Payroll Department costs are allocated to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are allocated on the basis of the number of purchase requisitions. The Payroll Department had costs of $41,664, and the Purchasing Department had expenses of $13,630 The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $285,000 $378,000 $867,000 Number of employees: Weekly payroll (52 weeks per year) 220 75 80 Monthly payroll 34 45 32 Number of purchase requisitions per year 2,000 1,400 1,300 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 cost driver information in (a), determine the annual amount of payroll and purchasing costs allocated back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. Do not round interim calculations. Service department allocation rates: Payroll Department Purchasing Department Residential Commercial Government Contract Total Service department allocations: Payroll Department Purchasing Department Total c. Residential's service department allocation is ? than the other two divisions because Residential is a ? user of service department services. Residential has many employees on a weekly payroll, which translates into a ? number of check-issuing transactions.

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 Allocations

In divisional income statements prepared for Lemons Company, the Payroll Department costs are allocated to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are allocated on the basis of the number of purchase requisitions. The Payroll Department had costs of $41,664, and the Purchasing Department had expenses of $13,630 The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

	Residential	Commercial	Government Contract
Sales	$285,000		$378,000		$867,000
Number of employees:
	Weekly payroll (52 weeks per year)	220		75		80
	Monthly payroll	34		45		32
	Number of purchase
	requisitions per year	2,000		1,400		1,300

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 cost driver information in (a), determine the annual amount of payroll and purchasing costs allocated back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. Do not round interim calculations.

Service department allocation rates:
Payroll Department
Purchasing Department

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

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

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