=+6-53 KKK Activity-based costing, activity-based management, merchandising OBJECTIVES 7, 8 BooksNMore is a large city bookstore that

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=+6-53 KKK Activity-based costing, activity-based management, merchandising OBJECTIVES 7, 8 Books’N’More is a large city bookstore that sells books and music CDs, and has a café. It operates at capacity and allocates selling, general and administration costs to each product line using the cost of merchandise of each product line. Books’N’More wants to optimise the pricing and cost management of each product line. It is wondering if its accounting system is providing it with the best information for making such decisions.

Books’N’More Product line information for the year ended 31 December 2014 Books CDs Café

Revenues $3 720 480 $2 315 360 $736 216 Cost of merchandise $2 656 727 $1 722 311 $556 685 Cost of café cleaning — — $18 250 Number of purchase orders placed 2 800 2 500 2 000 Number of deliveries received 1 400 1 700 1 600 Hours of shelf-stocking time 15 000 14 000 10 000 Items sold 124 016 115 768 368 108 Books’N’More incurs the following selling, general and administration costs:

Books’N’More Selling, general and administration (S, G & A) costs for the year ended 31 December 2014 Purchasing department expenses $474 500 Receiving department expenses 432 400 Shelf-stocking labour expense 487 500 Customer support expense (cashiers and floor employees) 91 184

$1 485 584 Required 1 Suppose Books’N’More uses cost of merchandise to allocate all S, G & A costs. Prepare product line and total company income statements.

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Cost Accounting A Managerial Emphasis

ISBN: 9781442563377

2nd Edition

Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan

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