question

Bonpreu is a grocery company with stores throughout Spain Suppose the company is planning an expansion of its store in central Madrid. A preliminary analysis has shown the packaged food department to be the most profitable so the company plans to increase its space the most. Assume that the Madrid store has just three departments produce packaged food, and meat. The most recent annual report for the store showed sales of 3,400, 300, which gonerated a gross margin of 900,300 Sales and gross margins of the three departments were as follows Click the icon to view the sales and 10% margins In addition to cost of products sold the store has 1 125000 of support costs, so operating income is 1000 300 - 1,125 000 (224 700) Bonpreu currently uses an accounting system that uses cost of products sold as a cost allocation base for allocating support costs Carlos Suarez controller of Bonprou, recently attended a seminar on activity based costing He suggests that Bonpreu management should undertake further analysis before deciding which product gets the largest increase in space in the expansion He has asked you, his assistant to load this analysis Road the requirements Requirement 1. The starting point of your analysis is to determine product profitability under the existing cost accounting system Compute the operating income and the operating incomo as a percent of sales for each department using Bonpreu's existing system Use this information to assess the relative profitability per euro of wes of each of the three departments Start by determining the formula needed to compute ndirect cost rates, then enter the amount to calculate the indirect cost rate under the company's exsting cost systom (Round the rate to two decimal places, XX) Indirect cost a location rate - with stores throughout Spain Suppose the ision of its store in central Madrid. A preliminary ged food department to be the most profitable, so its space the most Assume that the Madrid store Foduce, packaged food, and meat The most recent wed sales of 3.400,300, which generated a gross d gross margins of the three departments were as In addition to cost of products sold, the store costs, so operating income is 900,300 - 1, Bonpreu currently uses an accounting syster sold as a cost-allocation base for allocating s controller of Bonpreu, recently attended a ser costing. He suggests that Bonpreu managem analysis before deciding which product gets t in the eymansion He has asked on his assis - Data table Packaged Food Produce Meat Total Revenues 404.800 250,000 1.240,000 750,000 1,755 500 3.400,300 1,500,000 2,500,000 Cost of products sold 154 800 490,000 255,500 900 300 Gross margin Print Done eg eynansion. He has asked you his Requirements 9 po erc epa mul two 1. The starting point of your analysis is to determine product profitability under the existing cost accounting system Compute the operating income and the operating income as a percent of sales for each department using Bonpreu's existing system. Use this information to assess the relative profitability per euro of sales of each of the three departments 2. Suarez asks you next to develop product costs using an activity-based accounting system You determine that there are five major activities, each with a different cost driver to be used as a cost-allocation base (Click the icon to view the cost drivers and cost-allocation bases) You have determined the following information about the cost drivers Click the icon to view the data ) The total cost of each activity was as follows. (Click the icon to view the costs) Using these data and activity-based costing, calculate the operating income and operating income as a percent of sales for each product. (For example, note that each purchase order costs 92,550/6 170 = 15 to process.) 3. Propose a strategy for expansion Which information, that based on the current costing system or that based on the activity-based costing system is most useful? Why? What additional information would you like to have before making a more definitive recommendation on an expansion strategy? Print Done PERTSOTT oss margins of the three departments were as analysis before deciding which prod in the expansion. He has asked you Requirements 1. The starting point of your analysis is to determine product profitability under the Data table 3 a Ordering-Placing of orders for purchases b Delivery-Physical delivery and receipt of merchandise CShelf-stocking-Stocking of merchandise on store shelves including ongoing restocking d Customer support-Assistance to customers, including check out and bagging e. Produce monitoring --Constantly checking on the stacking and freshness of produce The cost drivers for each activity are as follows Ordering Number of purchase orders Delivery Number of deliveries Shelf-stocking Hours of stocking time Customer support Number of items sold Produce monitoring Direct trace to the Produce Department TINO