Question
Books and Brew (BB) is a large city bookstore that sells books and music CD's, and also has a cafe. Currently, BB uses a single-driver
Books and Brew (BB) is a large city bookstore that sells books and music CD's, and also has a cafe. Currently, BB uses a single-driver system to allocate its operating costs to each of its three product lines, using the number of items sold as the single cost driver. But BB's management is concerned that this allocation system may not be providing the best information for making a variety of pricing decisions. BB's operating costs for 2014 were as follows:
Purchase Department | $458,000 |
Receiving Department | $429,000 |
Shelf-stocking employee salaries | $455,000 |
Cashiers and floor employee salaries | $137,000 |
2014 information about BB's product lines is also available:
Books | CD's | Cafe | |
Revune | $4,109,000 | $2,008,000 | $806,000 |
Cost of merchandise | $2,886,000 | $1,501,000 | $525,000 |
Number of orders placed | 2,760 | 2,570 | 2,010 |
Number of deliveries recieved | 1,380 | 1,790 | 1,620 |
Hours of shelf stock time | 15,300 | 14,000 | 10,300 |
Number of items sold | 117,000 | 108,000 | 264,000 |
Using BB's single-driver system to allocate its operating costs, how much was allocated to CD's in 2014?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started