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Question content area top left Part 1 Carrefour is a grocery company with stores throughout Spain. Suppose the company is planning an expansion of its
Question content area top left
Part
Carrefour 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 euro comma comma which generated a gross margin of euro comma Sales and gross margins of the three departments were as follows:
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Question content area top right
Part
In addition to cost of products sold, the store has euro comma comma of support costs, so operating income is euro comma euro comma comma euro comma Carrefour currently uses an accounting system that uses cost of products sold as a costallocation base for allocating support costs. Miguel Flores controller of Carrefour recently attended a seminar on activitybased costing. He suggests that Carrefour 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 lead this analysis.
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Question content area bottom
Part
Requirement 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 Carrefours existing system. Use this information to assess the relative profitability per euro of sales of each of the three departments.
Start by determining the formula needed to compute indirect cost rates, then enter the amount to calculate the indirect cost rate under the company's existing cost system. Round the rate to two decimal places, XX
Part
Indirect cost allocation rate
Total indirect support
Part
Now compute the operating income and the operating income as a percent of sales for each department using Carrefours existing system. Use a minus sign or parentheses to show an operating loss or an operating loss as a percent of sales. Round the operating incomeloss as a percent of sales to two decimal places, XXX
Packaged
Produce
Food
Meat
Revenues
Cost of products sold
Gross margin
Allocation of support costs
Operating income loss
Operating income loss as a
percent of sales
Part
Use the information to assess the relative profitability per euro of sales of each of the three departments.
Under the existing cost system the
department appears to be the most profitable relative to the amount of sales from that department and the
department appears to be the least profitable relative to the amounts of sales.
Part
Requirement Using these data and activitybased costing, calculate the operating income and operating income as a percent of sales for each product.For example, note that each purchase order costs euro comma comma euro to process.
Begin by determining the indirect cost rate per activity using the same formula labels as you determined in requirement The calculation of the indirect cost rate to allocate ordering coststhe cost per purchase order has been given to you as an example. Round the rate to two decimal places, XX
Part Part Part
Ordering
euros per order
Delivery
Shelfstocking
Customer support
Part
Now compute the operating income and the operating income as a percent of sales for each department using the activitybased data. Complete all answer boxes. Use a minus sign or parentheses to show an operating loss or an operating loss as a percent of sales. Round the operating incomeloss as a percent of sales to two decimal places, XXX
Packaged
Produce
Food
Meat
Revenues
Cost of products sold
Gross margin
Allocation of support costs:
Ordering
Delivery
Shelfstocking
Customer support
Produce monitoring
Operating income loss
Operating income loss as a
percent of sales
Part
Under the ABC cost system the
packaged food
produce
meat
department appears to be the most profitable relative to the amount of sales from that department and the
packaged
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