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
Answers: 1
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