80.2K

Verified Solution

Link Copied!

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 $$8\mathrm{.}9$ million.

Selected data for the two divisions for the most recent year follow:

Requlred:

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 $A$

Required B

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.

Answer & Explanation Solved by verified expert

See Answer