Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman

Exercise 7

Purchasing Department
The purchasing department of Bradley Inc. is responsible for companywide purchasing. Its total costs are assigned to each division based on the number of purchase orders the purchasing department processes for each division. The purchasing department's fixed costs are $300,000 per year and it expects to process 15,000 purchase orders (POs) at a variable cost of $50 per purchase order. Purchasing costs do not include the cost of the items purchased.
Purchasing processed 16,000 POs during the year and incurred total costs (excluding the cost of the items purchased) of $1,180,000.
Required:
a. Design a performance evaluation report for the purchasing department.
b. Describe what each item in the report measures.
c. Evaluate the performance of the purchasing department.
d. What other performance measures would you want to collect and report for the purchasing department?