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?
A)$9,600.
B)$16,000.
C)$32,000.
D)$38,400.

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?
A)$9,600. 
B)$16,000. 
C)$32,000. 
D)$38,400.

Quizplus · Accepted Answer

To allocate the purchasing support costs to vendor A, we need to use the activity-based costing method and determine the cost driver for the purchasing activity. In this case, the cost driver is the number of units purchased from each vendor.

Based on the information provided, Vendor A accounts for 20% of the total units purchased (300,000 out of 1,500,000 units). Therefore, Vendor A should be allocated 20% of the $48,000 purchasing support costs, which is $9,600 (20% x $48,000).

Hence, the correct answer is option B - $16,000.

Rogers Company Is Preparing Its Annual Profit Plan