Barbara and her colleague Linda are having a debate about the nature of their merchandising company's purchasing department costs. Barbara believes the purchasing department costs should be considered batch-level costs and allocated to product lines based on the number of purchase orders used in each area. Linda believes the costs should be considered unit-level costs because the volume of units needed drives the amount of purchasing. Data for both cost drivers, along with total purchasing department costs for the company, is as follows. Purchasing department costs Budgeted number of purchase orders Budgeted number of units $5,425,380 39,400 31,914,000 The first product line requires 50 purchase orders this year in order to purchase 28,000 units. 

How much purchasing cost would be allocated to this line under the

 (a) batch-level assumption and 

(b) unit-level assumption?

Answer rating: 100% (QA)

a Batchlevel assumption Batchlevel costs are allocated based on the number of batches or purchase or... View the full answer