Smurnov Company Has a Purchasing Department That Provides Services to Two

Essay

Smurnov Company has a purchasing department that provides services to two factories located in Austin and the other in Belmont. Budgeted costs for the purchasing department consist of $91,000 per year of fixed costs and $7 per purchase order for variable costs. The level of budgeted fixed costs is determined by the peak-period requirements. The Austin factory requires 3/7 of the peak-period capacity and the Belmont factory requires 4/7.During the year, 2,700 purchase orders were processed for the Austin factory and 3,900 purchase orders for the Belmont factory.Required:Compute the amount of purchasing department cost that should be charged to each factory for the year.