Rogers Company is preparing its annual profit plan. As part of its analysis of t

Question

Rogers Company is preparing its annual profit plan. As part of its analysis of the cost of its purchasing activity, management estimates that the $48,000 for purchasing support should be assigned to the individual vendors from the information given as follows:

What is the amount of the purchasing costs that should be allocated to Vendor A assuming Rogers uses units purchased to compute activity-based costs?

        Vendor A        Vendor B Units purchased 100,000 200,000 Purchase orders (annual) 6 24 Number of shipments received 12 52

Explanation / Answer

Hi,

Please find the answer as follows:

Purchasing costs that should be allocated to Vendor A = 100000/(100000 + 200000)*48000 = 16000

Answer is 16000.

Thanks.

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