Question
The purchasing department buys all of its raw materials, supplies, and parts. This department is a cost center. It uses a flexible budget based on
The purchasing department buys all of its raw materials, supplies, and parts. This department is a cost center. It uses a flexible budget based on the number of different items purchased to forecast department costs and as a reference for evaluation of actual costs. At the beginning of April, the purchasing department expected to purchase 4,100 different items. Given the expected number of items, the department calculated its costs for the month to be $1,250,000. In the month of April, the actual costs were $1,425,000 for purchasing 4,700 different items. This resulted in an unfavorable variance of $43,000 compared to the flexible budget. The budgeted amount for fixed cost and variable cost per item for the department did not change. What is the fixed cost per month and variable cost per item purchased for the department?
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