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

question 39

Essay

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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Definitions:

Clayton Act

A U.S. antitrust law enacted in 1914 aimed at preventing monopolies and unfair business practices that may hinder competition.

Antitrust Authorities

Government agencies or bodies responsible for enforcing laws aimed at promoting competition and preventing monopolistic practices.

Corporate Merger

The combination of two or more companies into a single legal entity, often to achieve operational efficiencies or gain market share.

Vertical Merger

The combination of two or more companies that operate at different stages within the production process of a good or service.