SP pic is engaged mainly in retailing fashion and leisure wear, camping equipment and protective clothing. The company's head office and warehouse are located on the east coast and the 50 shops it operates are divided into three divisions as follows:

Servicing of the shops is undertaken from the head office for:
• personnel and staff training • window display, sales promotion and advertising • warehousing and distribution - no goods are delivered direct to the shops from the manufacturers.
Costs for the three service functions are budgeted for the next financial year, as shown below, and it is desired to determine methods of apportioning these costs to the three retailing divisions.

You are required to:

(a) Prepare a statement showing how you would apportion the costs of the service functions to each of the retailing divisions.

(b) Explain, in a brief report, why you have selected the bases of apportionment that you have used in

(a) above and state any limitations.

Transcribed Image Text:

Division North-west West South No. of shops 16 13 21