Dill Shipyards operates a dry dock on the East Coast, where it builds and repairs ships. The company's Payroll Department supports its two divisions, Naval and Private. The Naval division has contracts with the Department of Defense and the Private division works primarily with commercial shippers, specializing in tankers. The annual cost of the Payroll Department is $9.4 million. Selected data for the two divisions for the most recent year follow: Total Payroll ($000) $ 588,000 462,000 Naval Private Required: a. What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees? b. What is the cost charged to each division if Dill allocates Payroll Department costs based on the total payroll? c. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing or building the ship, including any overhead assigned to the division. Contracts with commercial shipping companies are almost all fixed price, meaning the price does not depend directly on the cost. Will the allocation base selected affect the amount of revenue? Complete this question by entering your answers in the tabs below. Required A Number of Employees 14,700 20,300 Naval What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees? Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands. Drivoto Required B Required C Cost Allocation
Dill Shipyards operates a dry dock on the East Coast, where it builds and repairs ships. The company's Payroll Department supports its two divisions, Naval and Private. The Naval division has contracts with the Department of Defense and the Private division works primarily with commercial shippers, specializing in tankers. The annual cost of the Payroll Department is $9.4 million. Selected data for the two divisions for the most recent year follow: Total Payroll ($000) $ 588,000 462,000 Naval Private Required: a. What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees? b. What is the cost charged to each division if Dill allocates Payroll Department costs based on the total payroll? c. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing or building the ship, including any overhead assigned to the division. Contracts with commercial shipping companies are almost all fixed price, meaning the price does not depend directly on the cost. Will the allocation base selected affect the amount of revenue? Complete this question by entering your answers in the tabs below. Required A Number of Employees 14,700 20,300 Naval What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees? Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands. Drivoto Required B Required C Cost Allocation
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Dill Shipyards operates a dry dock on the East Coast, where it builds and repairs ships. The company's Payroll Department supports its
two divisions, Naval and Private. The Naval division has contracts with the Department of Defense and the Private division works
primarily with commercial shippers, specializing in tankers. The annual cost of the Payroll Department is $9.4 million.
Selected data for the two divisions for the most recent year follow:
Total Payroll
($000)
$ 588,000
462,000
Naval
Private
Required:
a. What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees?
b. What is the cost charged to each division if Dill allocates Payroll Department costs based on the total payroll?
c. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing or
building the ship, including any overhead assigned to the division. Contracts with commercial shipping companies are almost all
fixed price, meaning the price does not depend directly on the cost. Will the allocation base selected affect the amount of revenue?
Complete this question by entering your answers in the tabs below.
Required A
Number of
Employees
14,700
20,300
Naval
What is the cost charged to each division if Dill allocates Payroll Department costs based on the number of employees?
Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands.
Drivoto
Required B Required C
Cost Allocation
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