Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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 wasn't 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 Management salaries $42,500 850 Quantity of Cost Driver hours devoted to managing the lines square feet of space occupied Percentage of sales revenu 16,500 1,650 Facility costs Insurance and other 11,600 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 golfline? Costs allocated $ How much of these costs would have been allocated had Lisa used activity-based rates? Costs allocated $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions