In divisional income statements prepared for Mills Construction Company, the Pay

Question

In divisional income statements prepared for Mills Construction Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll checks, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $32,392, and the Purchasing Department had expenses of $12,470 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $ 261,000 $ 345,000 $ 793,000 Number of employees: Weekly payroll (52 weeks per year) 125 80 85 Monthly payroll 28 39 26 Number of purchase requisitions per year 1,800 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. 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 $ per check Purchasing Department $ per requisition Residential Commercial Government Contract Total Service department charges: Payroll Department $ $ $ $ Purchasing Department $ $ $ $ Total $ $ $ c. Residential's service department charge is Selecthigherlower than the other two divisions because Residential is a Selectheavylight user of service department services. Residential has many employees on a weekly payroll, which translates into a Selectlargersmaller number of check-issuing transactions. Check My Work (2 remaining) Icon Key Icon Key Previous Question 4 of 11 Next Exercise 24-5 (Algorithmic)

Explanation / Answer

a) residential commercial government weekly payroll employees 125 80 85 290 no of checks (52 weeks) 6500 4160 4420 15080 monthly payroll employees 28 39 26 93 no of checks (12 months) 336 468 312 1116 total no of checks in a year 6836 4628 4732 16196 no of purchase requisitions 1800 1300 1200 4300 b) payroll department costs 32392 costs per check 2.0 costs charged back to depts 13672 9256 9464 32392 purchase department costs 12470 costs per purchase requisition 2.9 cost charged back to depts 5220 3770 3480 12470 c) Residential's service dept charge is higher than the other deparments because it is a heavy user of the service of service departments. Residential has many employees on the weekly payroll, which translates into a larger no of check-issuing transactions.

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