Question
Mr. Bailey would like you to start by analyzing the Payroll Office expenses, and allocating the total expenses to each division. He has decided to
Mr. Bailey would like you to start by analyzing the Payroll Office expenses, and allocating the total expenses to each division. He has decided to use the number of payroll checks as the activity base for the allocation.
Fill in the blanks below, allocating the total expense for the Payroll Office to each of the two divisions.
Division | Allocated Service Department Charges |
---|---|
Audit Division | 7,150 |
Tax Division 22,100 |
|
Mr. Bailey has prepared the following divisional income statement for you to review, assuming no transfer of excess capacity hours occurs. He has also included the total amounts for BOR CPAs, Inc. in the rightmost column.
Complete the Divisional Income Statements with your data from the Payroll panel.
BOR CPAs, Inc. |
Divisional Income Statements |
For the Year Ended December 31, 2016 |
1 |
| Audit Division | Tax Division | Total Company |
2 | Fees earned: |
|
|
|
3 | Audit fees (12 engagements) | $900,000.00 |
| $900,000.00 |
4 | Tax fees (45 engagements) |
| $708,750.00 | 708,750.00 |
5 | Transfer-pricing fees |
|
| 0.00 |
6 | Expenses: |
|
|
|
7 | Variable: |
|
|
|
8 | Audit hours provided by Audit Division | 216,000.00 |
| 216,000.00 |
9 | Tax hours provided by Tax Division |
| 283,500.00 | 283,500.00 |
10 | Excess capacity hours paid to salaried staff |
| 48,000.00 | 48,000.00 |
11 | Audit hours provided by Tax Division |
| 0.00 | 0.00 |
12 | Fixed expenses | 50,000.00 | 65,500.00 | 115,500.00 |
13 | Income from operations before service department charges | $634,000.00 | $311,750.00 | $945,750.00 |
14 | Less service department charges for payroll |
|
|
|
15 | Income from operations |
|
|
|
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