A firm purchases from two suppliers. The procurement cost information is given b

Question

A firm purchases from two suppliers. The procurement cost information is given below:

activity

cost

cost driver

units of cost driver

units of cost driver

supplier 1

supplier 2

order transmittal and processing

$600

number of orders

1

4

unloading pallet

$2,000

number of containers

2

4

checking and storing

$400

number of pallets

40

60

If you apportion the total cost of $3000 according to the number of pallets received, how much of the cost would you attribute to supplier 1?

activity

cost

cost driver

units of cost driver

units of cost driver

supplier 1

supplier 2

order transmittal and processing

$600

number of orders

1

4

unloading pallet

$2,000

number of containers

2

4

checking and storing

$400

number of pallets

40

60

Explanation / Answer

Apportioning of the costs as per the criteria and the given data is as follows:

In case total cost of $3000 needs to be apportion only according to number of pallets received then it needs to be divided in the ratio of number of pallets that is 40:60 or 2:3. That results into $1,200 and $1,800

activity cost cost driver units of cost driver units of cost driver Apportioned cost supplier 1 supplier 2 supplier 1 supplier 2 order transmittal and processing $600 number of orders 1 4 $120 $480 unloading pallet $2,000 number of containers 2 4 $666.67 $1333.33 checking and storing $400 number of pallets 40 60 $160 $240 Totals $3,000 $946.67 $2,053.33 Criteria-apportionment TOTAL COST $3,000 number of pallets $1,200 $1,800

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