Chapter 3, Problem 2CE

Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents.

Required:

1. 1. Calculate the activity rate per purchase order.
2. 2. Calculate, in terms of purchase orders, the:
   1. a. total activity availability
   2. b. unused capacity
3. 3. Calculate the dollar cost of:
   1. a. total activity availability
   2. b. unused capacity
4. 4. Express total activity availability in terms of activity capacity used and unused capacity.
5. 5. What if one of the purchasing agents agreed to work half time for $14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?