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Service Department Charges 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 $38,256, 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: Government Residential Commercial Contract Sales $ 388,000 $ 514,000 $ 1,180,000 Number of employees: Weekly payroll (52 weeks per year) 200 70 75 Monthly payroll 30 41 28 Number of purchase requisitions per year 2,700 1,900 1,800 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 Monthly payroll Total Number of purchase requisitions per year 2,700 1,900 1,800 6,400 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. Do not round your interim calculations, round your answers to two decimal places, if required. Service department charge rates: Payroll Department per payroll check Purchasing Department s 2.9 per purchase requisition Residential Commercial Government Contract Total Service department charges: Payroll Department 38,256 Purchasing Department 7,830 5,510 5,220 18,560 Total 9 s C. Residential's service department charge is higher than the other two divisions because Residential is a heavy user of service department services. Residential has many employees on a weekly payroll, which translates into a larger number of payroll transactions. Differential Analysis for a Lease or Buy Decision Sloan Corporation is considering new equipment. The equipment can be purchased from overseas supplier for $3,000. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be 5400 per year over the four-year useful life of the equipment. Alternatively, Sloan can lease the equipment from a domestic supplier for $1,480 per year for four years, with no additional costs. Prepare a differential analysis dated December 3, to determine whether Sloan should lease (Alternative 1) or purchase (Alternative 2) the machine. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the machine user, as opposed to the machine owner.) If an amount is zero, enter "o". Use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Buy Equipment (Alt. 2) December 3 Lease Equipment (Alternative 1) Buy Equipment (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Income (loss)