Activity-based budgeting. The Chelsea location of Family Supermarket (FS), a Mastterlbuegetend chain of small neighbourhood grocery stores, is preparing its activity-based budget for January 2009. FS has three product categories: soft drinks, fresh produce, and packaged food.

The following table shows the four activities that consume indirect resources at the Chelsea store, the cost drivers and their rates, and the cost-driver amount budgeted to be consumed by each activity in January 2009.

REQUIRED 1. What is the total budgeted indirect cost at the Chelsea store in January 2009? What is the total budgeted cost of each activity at the Chelsea store for January 2009? What is the budgeted indirect cost of each product category for January 2009?
2. Which product category has the largest fraction of total budgeted indirect costs?
3. Given your answer in requirement 2, what advantage does FS gain by using an activitybased approach to budgeting over, say, allocating indirect costs to products based on cost of goods sold?LO1

Transcribed Image Text:

January January 2009 Budgeted Amount 2009 of Cost Driver Used Budgeted Cost-Driver Soft Activity Cost Driver Rate Drinks Fresh Produce Food Packaged Ordering Number of $ 90 14 24 14 purchase orders Delivery Number of $ 82 12 62 19 deliveries Shelf-stocking Hours of stocking $ 21 16 172 94 time Customer support Number of items sold $0.18 4,600 34,200 10,750