In divisional income statements prepared for Demopolis 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 $59,160, and the Purchasing Department had expenses of $20,680 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract
Sales $2,000,000 $3,250,000 $2,900,000
Number of employees:
Weekly payroll (52
weeks per year) 400 250 150
Monthly payroll 80 30 10
Number of purchase
requisitions per year 7,500 3,000 2,000
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.
c. Residential's service department charge isthan the other two divisions because Residential is a user of service department services. Residential has many employees on a weekly payroll, which translates into anumber of payroll transactions.