# Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.

Service Department Charges

In divisional income statements prepared for Mills Construction Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll checks, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of \$65,360, and the Purchasing Department had expenses of \$29,500 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:
Residential    Commercial    Government
Contract
Sales    \$ 617,000        \$ 817,000        \$ 1,876,000
Number of employees:
Weekly payroll (52 weeks per year)    165        60        65
Monthly payroll    32        43        30
Number of purchase
requisitions per year    2,100        1,500        1,400

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    \$ per check

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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