Thompson Aeronautics repairs aircraft engines. The company’s Purchasing Department supports its two departments, Defense and Commercial....
Thompson Aeronautics repairs aircraft engines. The company’s Purchasing Department supports its two departments, Defense and Commercial. The Defense division has contracts with the Department of Defense and the Commercial division works primarily with domestic airlines and air freight companies. The cost of the Purchasing Department is $6.70 million annually. Information on the activity of the Purchasing Department for the last year follows: Number of Purchase Orders Dollar Amount of Purchases Defense 8,800 $ 132,000,000 Commercial 35,200 198,000,000
Required: a. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the number of purchase orders? (Do not round intermediate calculations. Enter your answers in thousands of dollars.)
b. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the dollar amount of the purchases? (Do not round intermediate calculations. Enter your answers in thousands of dollars.)
Homework Answers
| a | |||
| Cost Allocation | |||
| Defense | 1340000 | or 1340 | =6700000/(8800+35200)*8800 |
| Commercial | 5360000 | or 5360 | =6700000/(8800+35200)*35200 |
| b | |||
| Cost Allocation | |||
| Defense | 2680000 | or 2680 | =6700000/(132+198)*132 |
| Commercial | 4020000 | or 4020 | =6700000/(132+198)*198 |
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Thompson Aeronautics repairs aircraft engines. The company’s
Purchasing Department supports its two departments, Defense and
Commercial....
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