Exercise 12-37 Alternative Allocation Bases (LO 12-6) Thompson Aeronautics repai

Question

Exercise 12-37 Alternative Allocation Bases (LO 12-6) 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 $7.80 million annually. Information on the activity of the Purchasing Department for the last year follows: Defense Commercial Orders 9,200 36,800 $124,000,000 186,000,000

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Cost of purchasing department         7,800,000.00 Total No of purchase orders = 9200 + 36800               46,000.00 Total $ amount of purchases = 124m+186m    310,000,000.00 Allocation basis no of purchase orders a) Defence = 9200/46000 * 7.8m         1,560,000.00 Commercial = 36800/46000*7.8m         6,240,000.00         7,800,000.00 Allocation basis $ amount of purchases a) Defence = 124m/310m*7.8m         3,120,000.00 Commercial = 186m/310m*7.8m         4,680,000.00         7,800,000.00

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