Lopez Company has a purchasing department that provides services to a factory located in Muncie and another in North Bend. Budgeted costs for the purchasing department consist of $72,000 per year of fixed costs and $5 per purchase order for variable costs.
The level of budgeted fixed costs is determined by peak-period requirements. The Muncie factory requires 4/9 of the peak-period capacity and the North Bend factory requires 5/9. Variable costs are driven by the number of purchase orders processed.
During the year, 3,500 purchase orders were processed for the Muncie factory and 4,500 purchase orders for the North Bend factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

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The Answer of Lopez Company has a purchasing department that provides services to a factory located in Muncie and another in North Bend. Budgeted costs for the purchasing department consist of $72,000 per year of fixed costs and $5 per purchase order for variable costs.
The level of budgeted fixed costs is determined by peak-period requirements. The Muncie factory requires 4/9 of the peak-period capacity and the North Bend factory requires 5/9. Variable costs are driven by the number of purchase orders processed.
During the year, 3,500 purchase orders were processed for the Muncie factory and 4,500 purchase orders for the North Bend factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.

Lopez Company Has a Purchasing Department That Provides Services to a Factory