Question

The purchasing department of Xena Co. creates $676,000 of overhead costs each year. The annual cost and quantity of activity involved in each primary task in the department follow
Required:
(a) Assume that Xena allocates all purchasing depart- ment costs to products using number of purchase orders issued only. Calculate the purchasing department cost that would be allocated to Product #548.
(b) Assume that Xena allocates purchasing department costs to products using activity based costing. Determine the cost per type of activity in the purchasing department. Determine the purchasing department cost that would be allocated to Product #548.
(c) Which of the two allocations do you believe to be a more accurate representation of the cost of Product #548? Explain the reasoning for your answer.


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  • CreatedMarch 27, 2015
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