Reference no: EM132687259

Problem - Service Department Charges - In divisional income statements prepared for Brooks 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 $84,000, and the Purchasing Department had expenses of $40,040 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

	Residential	Commercial	Government Contract
Sales	$720,000	$975,000	$2,240,000
Number of Employees:
Weekly Payroll (52 weeks per year)	200	100	120
Monthly Payroll	50	80	50
Number of purchase requisitions  per year	3,000	2,500	2,200

Required -

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. Why does the Residential Division have a larger service department charge than the other two divisions, even though its sales are lower?