Redder Company has a purchasing department that provides services to two factories located in Fargo and the other in Custer.Budgeted costs for the purchasing department consist of $55,000 per year of fixed costs and $8 per purchase order for variable costs.The level of budgeted fixed costs is determined by the peak-period requirements.The Fargo factory requires 40% of the peak-period capacity and the Custer factory requires 60%.

During the coming year,1,800 purchase orders were processed for the Fargo factory and 2,700 purchase orders for the Custer factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

Question

During the coming year,1,800 purchase orders were processed for the Fargo factory and 2,700 purchase orders for the Custer factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

Quizplus · Accepted Answer

The Answer of Redder Company has a purchasing department that provides services to two factories located in Fargo and the other in Custer.Budgeted costs for the purchasing department consist of $55,000 per year of fixed costs and $8 per purchase order for variable costs.The level of budgeted fixed costs is determined by the peak-period requirements.The Fargo factory requires 40% of the peak-period capacity and the Custer factory requires 60%.

During the coming year,1,800 purchase orders were processed for the Fargo factory and 2,700 purchase orders for the Custer factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

Redder Company Has a Purchasing Department That Provides Services to Two