Determine purchasing department cost per unit if 1500 units

Reference no: EM13600967

Webb Corporation would like to institute an activity-based costing system to price products. The company's Purchasing Department incurs costs of $550,000 per year and has six employees. Purchasing has determined the three major activities that occur during the year.

Activity Allocation Measure # of People Total Cost

Issuing purchase orders # of purchase orders 1 $150,000
Reviewing receiving reports # of receiving reports 2 $175,000
Making phone calls # of phone calls 3 $225,000

During the year, 50,000 phone calls were made in the department; 15,000 purchase orders were issued; and 10,000 shipments were received. Product A required 200 phone calls, 150 receiving reports, and 50 purchase orders. Product B required 350 phone calls, 400 receiving reports, and 100 purchase orders.

a. Determine the amount of Purchasing Department cost that should be assigned to each of these products.
b. Determine Purchasing Department cost per unit if 1,500 units of Product A and 3,000 units of Product B were manufactured during the year.

Reference no: EM13600967

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