Freight cost is allocated based on quantity sold. All other indirect expenses could be allocated evenly across the stores, by the square footage, or by the quantity of bottles sold. How would the allocation method impact the profitability and the ash flows of the new store?

Why does allocating freight expenses based on the quantity sold a reasonable choice?

How does the allocation method impact projected rent expense4, salary expense, and

advertising expense? Which method is the fairest? Would you recommend that the

company use a single or multi-driver allocation method? Why?

As the manager of Store which would you prefer? Why?

Question

Freight cost is allocated based on quantity sold. All other indirect expenses could be allocated evenly across the stores, by the square footage, or by the quantity of bottles sold. How would the allocation method impact the profitability and the ash flows of the new store?

Why does allocating freight expenses based on the quantity sold a reasonable choice?
How does the allocation method impact projected rent expense4, salary expense, and

advertising expense? Which method is the fairest? Would you recommend that the

company use a single or multi-driver allocation method? Why?
As the manager of Store which would you prefer? Why?

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Freight cost is allocated based on quantity sold. All other indirect expenses could be allocated evenly across the stores, by the square footage, or by

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