Mondo Music Company recently established a centralized purchasing department to handle purchasing for its four retail stores. The costs of the purchasing department include fixed costs of $42,000 per year (salaries, office equipment, and computers for the department itself) and variable costs of $2.76 per purchase order (supplies, long distance phone calls, and so on). Estimated usage in terms of the number of purchase orders by the four retail stores is as follows:

Denver P7250 Wheatridge 700 Littleton 3,000 Englewood 4,550 Total 10,000 By the end of the first year, the actual usage of the purchasing department was:

Denver, 1,900 purchase orders; Wheatridge, 500 purchase orders; Littleton, 3,100 purchase orders; and Englewood, 4,850 purchase orders.

Required:

1. Calculate a single charging rate per purchase order for purchasing department services.

2. At the end of the year, what were the purchasing department charges for each of the four stores? What was the total amount charged by the purchasing department to the stores?

3. Based on the fixed and variable amounts budgeted, how much should it have cost the purchasing department to process 10,350 purchase orders? Is this amount different from the amount calculated in Requirement 2? Why or why not?