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 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 $53,344, and the Purchasing Department had expenses of $25,370 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: ResidentialCommercialGovernmentContractSales$530,000 $703,000 $1,614,000 Number of employees: Weekly payroll (52 weeks per year)110 60 65 Monthly payroll28 39 26 Number of purchase requisitions per year1,800 1,300 1,200 ResidentialCommercialGovernment ContractTotalService department charges:Payroll Department2$Purchasing DepartmentTotal$4c. Residential's service department charge isthan the other two divisions because Residential is auser of servicedepartment services. Residential has many employees on a weekly payroll, which translates into anumber of check-issuing transactions. a. 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 payrollTotalNumber of purchase requisitions peryear:b. 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 interim calculations,round your answers to two decimal places, if required.Service department charge rates:Payroll Departmentpayroll distributionPurchasing Departmentper requisition

Payroll: It is the amount of total compensation paid to employee by the organization.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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 $53,344, and the Purchasing Department had expenses of $25,370 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

	Residential	Commercial	Government Contract
Sales	$530,000		$703,000		$1,614,000
Number of employees:
	Weekly payroll (52 weeks per year)	110		60		65
	Monthly payroll	28		39		26
Number of purchase
	requisitions per year	1,800		1,300		1,200

Residential
Commercial
Government Contract
Total
Service department charges:
Payroll Department
2$
Purchasing Department
Total
$4
c. Residential's service department charge 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.

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
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
payroll distribution
Purchasing Department
per requisition

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