Cost Allocation Methods at Target

• Values:

• Direct Costs: $70,000,000
• Indirect Costs: $35,000,000
• Allocation Bases: Number of Stores, Sales Revenue
• Requirements:

0. Allocate indirect costs using the number of stores as the allocation base for Target.
1. Allocate indirect costs using sales revenue as the allocation base for Target.
2. Compare the outcomes of the two cost allocation methods.
3. Discuss the importance of accurate cost allocation in retail operations.