Rainier Company Has a Purchasing Department That Provides Services to Two

Essay

Rainier Company has a purchasing department that provides services to two factories located in Carbondale and the other in Peoria. Budgeted costs for the purchasing department consist of $55,000 per year of fixed costs and $8 per purchase order for variable costs. The level of budgeted fixed costs is determined by the peak-period requirements. The Carbondale factory requires 40% of the peak-period capacity and the Peoria factory requires 60%.
During the current year, 1,800 purchase orders were processed for the Carbondale factory and 2,700 purchase orders for the Peoria factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for the year.