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Lisa was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee golf items. Since the frisbee golf segment was new, she

Lisa was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee golf items. Since the frisbee golf segment was new, she wasnt surprised to see a segment loss after allocating her selling, general, and administrative costs to the three product areas using one rate, based on percentage of sales revenue. After looking more closely, though, she realized the selling, general, and administrative costs came from three main activity areas and could be allocated using more specific rates based on cost drivers as follows.

SG&A Costs

Total Cost

Quantity of Cost Driver

Management salaries

$42,500 850 hours devoted to managing the lines

Facility costs

16,500 1,650 square feet of space occupied

Insurance and other

11,600 Percentage of sales revenue

If the frisbee golf line requires 25 hours of management time and 135 square feet of space, and it generates just 6% of total revenues for the shop, how much of these total SG&A costs were initially allocated to the golf line?

Costs allocated

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