Mobile Repair Company is preparing its annual profit plan. As part of its analys

Question

Mobile Repair Company is preparing its annual profit plan. As part of its analysis of the cost of its purchasing activity, management estimates that the $250,000 for purchasing support shluld be assigned to the individual vendors from the information given:

a. Prepare a schedule to allocate the purchasing costs to the 3 vendors, assuming Mobile Repair uses units purchased to compute activity-based costs.

b. Prepare a schedule to allocate the purchasing costs to the 3 vendors, assuming Mobile Repair uses purchase orders to compute activity-based costs.

c. Prepare a schedule to allocate the purchasing costs to the 3 vendors, assuming Mobile Repair uses number of shipments to compute activity-based costs.

Vendor A Vendor B Vendor C Units purchased 200,000 300,000 300,000 Purchase orders(annual)             12             48           200 # of shipments received             24           104             50

Explanation / Answer

Answer:-a)-Total units purchased =200000+300000+300000=800000 orders

Purchasing cost =$250000

Vendor A=(200000/800000)*250000 =$62500

Vendor B=(300000/800000)*250000 =$93750

Vendor C=(300000/800000)*250000 =$93750

b)-Total purchase orders=12+48+200 =260 orders

Purchasing cost =$250000

Vendor A=(12/260)*250000 =$11538

Vendor B=(48/260)*250000 =$46154

Vendor C=(200/260)*250000 =$192308

c)-No. of shipments received=24+104+50 =178 shipments

Purchasing cost =$250000

Vendor A=(24/178)*$250000 =$33708

Vendor B=(104/178)*$250000 =$146067

Vendor C=(50/178)*$250000 =$70225

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