Henderson Industrial Products Uses a Centralized Service Department for Procurement

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions Construction, Manufacturing, and Military. The total monthly costs of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division.
$$\begin{array} { | l | r | } \hline \text { Divisions } & \text { Purchase Orders } \\\hline \text { Construction } & 3,200 \\\hline \text { Manufacturing } & 2,400 \\\hline \text { Military } & 800 \\\hline \text { Total } & 6,400 \\\hline\end{array}$$
When Henderson calculates a rate per purchase order, that rate should be calculated on the basis of the full cost of the procurement department.

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