Bernacke Corp. is instituting an activity-based costing project in its 10-person purchasing department. Annual departmental overhead costs are $731,250. Because finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this activity area. Many purchase orders are received in a single shipment.

One special-order product manufactured by the company required the following purchasing department activities: 225 telephone calls, 50 purchase orders, and 25 receipts.
a. What amount of purchasing department cost should be assigned to this product?
b. If 100 units of the product are manufactured during the year, what is the purchasing department cost per unit?
c. If purchasing department costs had been allocated using telephone calls as the allocation base, how much cost would have been assigned to thisproduct?

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Activity Find best suppliers Issue purchase orders Review receiving reports Allocation Measure Number of telephone calls Number of purchase orders Number of receiving reports Quantity Total Cost 375,000 $375,000 46,875 187500 28,125 168,750