In divisional income statements prepared for LeFevre Company, the Payroll Depart
ID: 2430648 • Letter: I
Question
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 $69,984, and the Purchasing Department had expenses of $31,860 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:
a. Determine the total 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 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.
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.
Residential Commercial GovernmentContract Sales $666,000 $883,000 $2,026,000 Number of employees: Weekly payroll (52 weeks per year) 190 60 65 Monthly payroll 28 39 26 Number of purchase requisitions per year 2,300 1,600 1,500
Explanation / Answer
a.
b.
c. Residential's service department charge is higher than the other two divisions because Residential is a higher user of of service department services. Residential has many employees on a weekly payroll, which translates into a higher number of check-issuing transactions.
Residential Commercial Government Contract Total Number of payroll checks: Weekly payroll 9880 3120 3380 16380 Monthly payroll 336 468 312 1116 Total 10216 3588 3692 17496 Number of purchase requisitions per year: 2300 1600 1500 5400Related Questions
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