(Activity-based costing) Management at Vancouver Ltd. has decided to institute a pilot activity-based costing project in its five-person purchasing department. An¬ nual departmental costs are $473,500. Because finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this area.

During the year, the purchasing department made 150,000 telephone calls, issued 10,000 purchase orders, and reviewed 7,000 receiving reports. Many pur¬ chase orders are received in a single shipment.
One product manufactured by Vancouver Ltd. required the following pur¬ chasing department activities: 125 telephone calls, 60 purchase orders, and 15 receipts.

a. What amount of purchasing department cost should be assigned to this product?

b. If 200 units of the product are manufactured during the year, what is the purchasing department cost per unit?LO1

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ACTIVITY Find best suppliers Issue purchase orders Review receiving reports ALLOCATION MEASURE Number of telephone calls Number of purchase orders Number of receiving reports NUMBER OF TOTAL PEOPLE COST 3 $300,000 1 100,000 73,500