10.3.5

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 $42,792, and the Purchasing Department had expenses of $18,560 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

		Residential		Commercial		Government Contract
Sales		$ 388,000		$ 514,000		$ 1,180,000
Number of employees:
	Weekly payroll (52 weeks per year)	215		85		90
	Monthly payroll	28		39		26
Number of purchase requisitions per year		2,700		1,900		1,800

Required:

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 52	____	____	____
Monthly payroll 12	____	____	____
Total	____	____	____	fill in the blank 10
Number of purchase requisitions per year	____	____	____	fill in the blank 14

b. Using the cost driver information in (a), determine the annual amount of payroll and purchasing costs allocated to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. Do not round interim calculations. Round your answers to two decimal places.

Support department allocation rates:
Payroll Department	$___
Purchasing Department	$___

	Residential	Commercial	Government Contract	Total
Support department allocations:
Payroll Department	$___	$____	$___	$___
Purchasing Department	____	____	____	____
Total	$___	$____	$___

The operating income and the amount of invested assets in each division of Demopolis Company are as follows:

	Operating Income		Invested Assets
Retail Division	$140,000		$700,000
Commercial Division	59,800		260,000
Internet Division	100,800		420,000

a. Compute the return on investment for each division. (Round to the nearest whole percentage.)

Division	Percent
Retail Division	____%
Commercial Division	____%
Internet Division	___%