1. Costco Wholesale and Walmart allocate their retail operating costs using activity-based costing. The following table summarizes the costs and cost drivers:

Department	Costco Total Cost ($)	Cost Driver	Cost Driver Quantity	Walmart Total Cost ($)
Electronics	$6,000,000	Sales revenue	$60,000,000	$5,000,000
Apparel	$4,000,000	Floor area (sq. ft.)	800,000 sq. ft.	$3,500,000
Home Goods	$2,500,000	Number of SKUs	15,000 SKUs	$2,000,000
Total	$12,500,000			$10,500,000

• Costco generated $70,000,000 in electronics sales revenue, has 1,000,000 sq. ft. of apparel floor area, and offers 20,000 home goods SKUs.
• Allocate retail operating costs per dollar of sales revenue, per sq. ft. of floor area, and per SKU for Costco and Walmart using activity-based costing.
• Discuss how differences in operating costs per dollar of sales impact profitability and competitive pricing strategies for Costco Wholesale and Walmart.