Reference no: EM13122936
In divisional income statements prepared for Mills 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 45,900 and the Purchasing Departmetn had expenses of 22,000 for the year. The following annual data for Residential, Commercial, and Government Contract Divisions were obtained from Corporate records:
Sales: Residential 460,000 Comercial: 610,000 Government Contract: 1,400,000
Number of employees:
Weekly payroll (52 weeks per year): Residential: 125 Commercial: 70 Government Contract: 75
Monthly Payroll: Residential 32 Commercial: 43 Government Contract: 30
Number of purchase requisitions per year: Residential 2,100 Commercial 1,500 Government Contract: 1,400
a. Determine the total amount of payroll checks and purchase requisitions processed per year by each division.
b. Using the activity base info 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 Divsion have a larger service department charge than the other two divsions, even though its sales are lower?
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