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Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisionsConstruction, Manufacturing, and Military. The total monthly costs of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division.
When Henderson calculates a rate per purchase order, that rate should be calculated on the basis of the full cost of the procurement department.
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