Redder Company Has a Purchasing Department That Provides Services to Two

question 14

Essay

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.

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