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3 Exercise 12-40 (Algo) 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 $5.10 million annually. eBook Information on the activity of the Purchasing Department for the last year follows. References Number of Purchase Orders 9,800 39,200 Dollar Amount of Purchases $152,000,000 228,000,000 Defense Commercial Required: a. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the number of purchase orders? b. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the dollar amount of the purchases? C. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing an engine, including any overhead assigned to the division. Contracts with commercial airlines and air freight companies are almost all fixed price, meaning the price does not depend directly on the cost. Will this affect Thompson's choice of an allocation base? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the number of purchase orders? (Do not round intermediate calculations. Enter your answers in dollars, not in millions.) Cost Allocation Defense Commercial 3 Exercise 12-40 (Algo) 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 $5.10 million annually. eBook Information on the activity of the Purchasing Department for the last year follows. References Number of Purchase Orders 9,800 39,200 Dollar Amount of Purchases $152,000,000 228,000,000 Defense Commercial Required: a. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the number of purchase orders? b. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the dollar amount of the purchases? c. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing an engine, including any overhead assigned to the division. Contracts with commercial airlines and air freight companies are almost all fixed price, meaning the price does not depend directly on the cost. Will this affect Thompson's choice of an allocation base? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the dollar amount of the purchases? (Do not round intermediate calculations. Enter your answers in dollars, not in millions.) Cost Allocation Defense Commercial

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