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 $59,984, and the Purchasing Department had expenses of $29,500 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

Residential Commercial Government

Sales		$617,000		$817,000		$1,876,000
Number of employees:
	Weekly payroll (52 weeks per year)	115		70		75
	Monthly payroll	38		49		36
Number of purchase requisitions per year		2,100		1,500		1,400

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 distribution
Purchasing Department	$      per requisition

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

Answer 1

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  = Weekly payroll × 52	5,980	3,640	3,900
Monthly payroll = Monthly payroll × 12	456	588	432
Total	6,436	4,228	4,332	14,996
Number of purchase requisitions per year:	2,100	1,500	1,400	5,000
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 = $59,984 / 14996	$4.00	per distribution
Purchasing Department = $29,500 / 5000	$5.90	per requisition
	Residential	Commercial	Government Contract	Total
Service department charges:
Payroll Department	$         25,744.00	$         16,912.00	$            17,328.00	$      59,984.00
Purchasing Department	$         12,390.00	$           8,850.00	$              8,260.00	$      29,500.00
Total	$         38,134.00	$         25,762.00	$            25,588.00	$      89,484.00