Question:
(ABC) Bernacke Corp. is instituting an activity-based costing project in its 10-personpurchasing department. Annual departmental overhead costs are $731,250. Because finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this activity area. Many purchase orders are received in a single shipment.
|
Activity
|
Allocation Measure
|
Quantity
|
Total Cost
|
|
Find best suppliers
|
Number of telephone calls
|
375,000
|
$375,000
|
|
Issue purchase orders
|
Number of purchase orders
|
46,875
|
187,500
|
|
Review receiving reports
|
Number of receiving reports
|
28,125
|
168,750
|
One special-order product manufactured by the company required the following purchasing department activities: 225 telephone calls, 50 purchase orders, and 25receipts.
a. What amount of purchasing department cost should be assigned to this product?
b. If 100 units of the product are manufactured during the year, what is the purchasing department cost per unit?
c. If purchasing department costs had been allocated using telephone calls as the allocation base, how much cost would have been assigned to this product?