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 Dept. Charges
Audit Division $7150.00
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