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Service Department Charges In divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of

Service Department Charges

In divisional income statements prepared for LeFevre 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 $40,712, and the Purchasing Department had expenses of $15,660 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

Residential Commercial Government Contract
Sales $327,000 $434,000 $996,000
Number of employees:
Weekly payroll (52 weeks per year) 235 65 70
Monthly payroll 28 39 26
Number of purchase
requisitions per year 2,300 1,600 1,500

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:

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. If required, round your answers to two decimal places. Do not round your interim calculations, round your answers to two decimal places, if required.

Service department charge rates:
Payroll Department $ payroll distribution
Purchasing Department $ per requisition

Residential Commercial Government Contract Total
Service department charges:
Payroll Department $ $ $ $
Purchasing Department
Total $ $ $

c. Residential's service department charge is than the other two divisions because Residential is a user of service department services. Residential has many employees on a weekly payroll, which translates into a number of check-issuing transactions.

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