Service Department Allocations

In divisional income statements prepared for Lemons Company, the Payroll Department costs are allocated to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are allocated on the basis of the number of purchase requisitions. The Payroll Department had costs of $82,576, and the Purchasing Department had expenses of $37,760 The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

		Residential		Commercial		Government Contract
Sales		$789,000		$1,046,000		$2,402,000
Number of employees:
	Weekly payroll (52 weeks per year)	215		75		80
	Monthly payroll	36		47		34
	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	fill in the blank 1	fill in the blank 2	fill in the blank 3
Monthly payroll	fill in the blank 4	fill in the blank 5	fill in the blank 6
Total	fill in the blank 7	fill in the blank 8	fill in the blank 9	fill in the blank 10
Number of purchase requisitions per year:	fill in the blank 11	fill in the blank 12	fill in the blank 13	fill in the blank 14

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

Service department allocation rates:
Payroll Department	$fill in the blank 15 per distribution
Purchasing Department	$fill in the blank 16 per requisition

	Residential	Commercial	Government Contract	Total
Service department allocations:
Payroll Department	$fill in the blank 17	$fill in the blank 18	$fill in the blank 19	$fill in the blank 20
Purchasing Department	fill in the blank 21	fill in the blank 22	fill in the blank 23	fill in the blank 24
Total	$fill in the blank 25	$fill in the blank 26	$fill in the blank 27

c. Residential's service department allocation is

higherlower

than the other two divisions because Residential is a

heavylight

user of service department services. Residential has many employees on a weekly payroll, which translates into a

largersmaller

number of check-issuing transactions.