Question

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 56.90 million annually. Information on the activity of the Purchasing Department for the last year follows: Number of Purchase Orders 9.400 37.000 Dollar Amount of Purchases $132,000,000 198,000,000 Dofonso Commercial 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 found intermediate calculations. Enter your answers in thousands of dollars.) Cost Allocation Defense Commercial 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.) Cost Allocation Defense Commercial

Answer 1

Thompson Aeronautics in the basis of no. of purchase order Defense : No. of orders of - Total orders defence x Total cost 9400 9400 +37600 X 6.90 million = 94oo X 6900000 47000 = $ 1380000 | Commeuiat : No. of onders of cemmauad * Potal cost - Toteel orders = 31600 47000 X 6900000 520000

Date Page Un the basis of dollar ases amount of preten efense : Total cost of purchasey / purchase of defense x Total of punchers $123 000DOR X_6900000 E132 prepot 19850000 = $2760000 communal i puchage of commercial x Petal cost of Purchasira _Total puhany postoj dipt. H __ =_ x6900000 191000000_ 148000 Opu +42000 DO - $41400o