Fox Books is a bookstore that has a caf$$ as well as selling books and stationery. It currently allocates

Administration, Selling and Other Operating Expenses using the Cost of Goods Sold of each product

department. Fox Books wants to maximise the accurate pricing and cost management of each

department. Management is questioning whether the accounting system is providing the best

information for making cost decisions.

Fox Books $$ Department Information for $30$ June $2024$

Caf$$ Books Stationery

Revenues $$1,472,432$ $$7,440,960$ $$4,630,720$

Cost of Goods Sold $$1,113\mathrm{.}370$ $$5,313,454$ $$3,444,622$

Caf$$ Cleaning Expense $$36,500--$

Number of Orders Placed $4,0005,6005,000$

Number of Deliveries Received $3,2002,8003,400$

Hours of Loading Inventory $20,00030,00028,000$

Items Sold $736,216372,048347,304$

The following Administration, Selling & Other Expenses are incurred:

Purchasing Department Expenses $$949,000$

Receiving Department Expenses $$864,800$

Inventory Loading Expenses $$975,000$

Customer Support Expenses $$273,552$

$$3,062,352$

Required:

a$)$ Prepare an income statement for each department using Cost of Goods Sold to allocate

Administration, Selling & Other Expenses.

b$)$ Identify and explain a better method for allocating Administration, Selling & Other Expenses

across the $3$ departments. Use your proposed method of allocation to prepare alternative income

statements for each department and compare them with the results in a$).$

c$)$ Write a brief report to the management of Fox Books to summarise your recommendations for

improvements to the accounting system, and how this information would be useful for

management decisions.