CH.12 Q.02 Dill Shipyards operates a dry dock on the East Coast, where it builds and repairs ships. The companys Payroll Department supports its two divisions, Naval and Private. The Naval division has contracts with the Department of Defense and the Private division works primarily with commercial shippers, specializing in tankers. The annual cost of the Payroll Department is $8.3 million.

Selected data for the two divisions for the most recent year follow:

Number of Employees Total Payroll ($000)

Naval 10,080 $ 526,400

Private 13,920 413,600

Required:

A. What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees?

Cost Allocation

Naval ???

Private ???

B. What is the cost charged to each division if Dill allocates Payroll Department costs based on the total payroll?

Cost Allocation

Naval ???

Private ???