Godfrey Corporation Would Like to Institute an Activity-Based Costing System $\mathrm{A}$

question 151

Essay

Godfrey Corporation would like to institute an activity-based costing system to price products.The company's Purchasing Department incurs costs of $550,000 per year and has six employees.Purchasing has determined the three major activities that occur during the year.

Activity	Allocation Measure	# of People	Total Cost
Issuing purchase orders	# of purchase orders	1	$150,000
Reviewing receiving reports	# of receiving reports	2	$175,000
Making phone calls	# of phone calls	3	$225,000

During the year,50,000 phone calls were made in the department;15,000 purchase orders were issued;and 10,000 shipments were received.Product A required 200 phone calls,150 receiving reports,and 50 purchase orders.Product B required 350 phone calls,400 receiving reports,and 100 purchase orders.
a. Determine the amount of Purchasing Department cost that should be assigned to each of these products.
b. Determine Purchasing Department cost per unit if 1,500 units of Prochuct $\mathrm{A}$ and 3,000 units of Product $\mathrm{B}$ were manufactured during the year.

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Definitions:

Empirical Evidence

Information obtained through observation or experimentation that is used as a basis for knowledge or validation of scientific findings.

Attention

Attention is the cognitive process of selectively concentrating on one aspect of the environment while ignoring other things.

REM Sleep

A phase of sleep characterized by rapid eye movement, during which dreaming often occurs, and is thought to play a role in memory consolidation.

Dream Recall

The ability to remember the details of dreams after waking up.