Service Department Charges In divisional income statements prepared for LeFevre

Question

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 $61,368, and the Purchasing Department had expenses of $25,080 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

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 $61,368, and the Purchasing Department had expenses of $25,080 for the year. The following annual data for Residential Commercial, and Government Contract divisions were obtained from corporate records: Government Residential Commercial Contract Sales $524,000 $695,000 $1,595,000 Number of employees: Weekly payroll (52 weeks per year) 200 80 85 Monthly payroll 38 36 Number of purchase requisitions per year 2,400 1,700 1,600 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

Explanation / Answer

a)

b)  

c) Residential service department charge is more than the other two divisions becuase the residential is a avid user of service departmenrt services. Residential has many employees on a weekly payroll which translates inot a larger number of check issuing transactions.

Residential Commercial Governemnt contract Total Number of payroll checks: Weekly payroll           10,400              4,160                                  4,420 18,980 Monthly payroll                 456                  588                                      432     1,476 Total           10,856              4,748                                  4,852 20,456 Number of purchase requisitions per year             2,400              1,700                                  1,600     5,700

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