Answer:
a. cost charge to each division using number of purchase orders as basis of allocation
total cost = $7.7million
Total number of orders
Defense division = 9,200
Commercial division = <u>36,800</u>
<u>46,000</u>
cost per order = $7,700,000/ 46,000
= $167.74
Defense division = $167.74*9,200 = $1,540,000
Commercial division = $167.74 * 36,800 = $6,160,000
b. Cost charge to each division using dollar amount of purchases as basis of allocation
Total amount of purchase by the departments
Defense division = $148,000,000
Commercial division= <u>222,000,000</u>
<u>370,000,000</u>
cost per division :
Defense division = <u>$148,000,000 </u> * $7,700,000
$370,000,000
= $3,080,000
Commercial division = <u>$222,000,000</u> * $7,700,000
$370,000,000
= $4,620,000
c. The method used in determining the price by each division does not have any impact in the selection of basis of allocating cost to each division.
Explanation:
