Books and Brew (BB) is a large city bookstore that sells books and music CD's, and...
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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 cost of merchandise 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 2017 were as follows: Purchasing department Receiving department Shelf-stocking employee salaries Cashiers and floor employee salaries $467,000 $441,000 $458,000 $111,000 2017 information about BB's product lines is also available: Books CD's Cafe Revenue $3,839,000 $2,351,000 $809,000 Cost of merchandise $2,775,000 $1,707,000 $525,000 Number of purchase orders placed 2,630 2,420 1,990 Number of deliveries received 1,480 1,810 1,590 Hours of shelf stocking time 14,600 14,900 11,300 Number of items sold 138,000 115,000 256,000 REQUIRED [ROUND ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] 1. Using BB's single-driver system to allocate its operating costs, how much was allocated to CD's in 2017? 2. If BB had used an activity-based costing system to allocate its operating costs in 2017, how much would have been allocated to Books? For cashiers and floor employee salaries, use number of items sold as the cost driver. For all other costs, the appropriate drivers should be clear. 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 cost of merchandise 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 2017 were as follows: Purchasing department Receiving department Shelf-stocking employee salaries Cashiers and floor employee salaries $467,000 $441,000 $458,000 $111,000 2017 information about BB's product lines is also available: Books CD's Cafe Revenue $3,839,000 $2,351,000 $809,000 Cost of merchandise $2,775,000 $1,707,000 $525,000 Number of purchase orders placed 2,630 2,420 1,990 Number of deliveries received 1,480 1,810 1,590 Hours of shelf stocking time 14,600 14,900 11,300 Number of items sold 138,000 115,000 256,000 REQUIRED [ROUND ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] 1. Using BB's single-driver system to allocate its operating costs, how much was allocated to CD's in 2017? 2. If BB had used an activity-based costing system to allocate its operating costs in 2017, how much would have been allocated to Books? For cashiers and floor employee salaries, use number of items sold as the cost driver. For all other costs, the appropriate drivers should be clear.
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Answer rating: 100% (QA)
To allocate the operating costs using activitybased costing we need to calculate the allocation rate... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Posted Date:
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