Question

Please answer both parts to Question 1.

1A. The following data were summarized from the accounting records for Jersey Coast Construction Company for the year ended June 30, 20Y8:

Cost of goods sold:
Commercial Division	$912,000
Residential Division	439,875
Administrative expenses:
Commercial Division	$149,400
Residential Division	129,575
Service department charges:
Commercial Division	$113,760
Residential Division	67,830
Sales:
Commercial Division	$1,364,500
Residential Division	750,060

Required:

Prepare divisional income statements for Jersey Coast Construction Company. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

1B. 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 $82,752, 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)	210		80		85
	Monthly payroll	30		41		28
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. Do not round your interim calculations, round your answers to two decimal places, if required.

Service department charge rates:
Payroll Department	$  per payroll check
Purchasing Department	$  per purchase requisition

	Residential	Commercial	Government Contract	Total
Service department charges:
Payroll Department	$	$	$	$
Purchasing Department
Total	$	$	$

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 payroll transactions.

Answer 1

1A. Divisional income statement for Jersey Coast Construction Company
	Commercial Division	Residential Devision
Sales	$1,364,500	$750,060
Less: Cost of goods sold	$912,000	$439,875
Gross Margine	$452,500	$310,185
Less: Administrative expenses	$149,400	$129,575
Service deoartment charges	$113,760	$67,830
Net operating profit	$189,340	$112,780
Part- 1B.
(a) Determination of total amount of payroll checks and purchase requisition processed per year
	Residential	Commercial	Government Contract	Total
Number of payroll checks:
Weekly payroll (weekly payroll x 52 weeks)	10,920	4,160	4,420	19,500
Monthly payroll (monthly payroll x 12 months)	360	492	336	1,188
Total	11,280	4,652	4,756	20,688
Number of purchase requisition per year	1,800	1,300	1,200	4,300
(b)
Service department charge rate:
Payroll department           ($82,752/20,688 payroll checks)		$4 per payroll check
Purchasing department    ($25,370/4,300 purchase requisition)		$5.90 per purchase requisition
	Residential	Commercial	Government Contract	Total
Service department charges:
Payroll department	$           45,120	$            18,608	$           19,024	$         82,752
	(11,280 x $4)	(4,652 x $4)	(4,756 x $4)
Purchasing department	$           10,620	$              7,670	$              7,080	$         25,370
	(1,800 x $5.90)	(1,300 x $5.90)	(1,200 x $5.90)
Total	$           55,740	$            26,278	$           26,104	$      108,122