Required: In a memo, please respond to Alan, president of BBCC, on the following issues: Activity-basedcosting Have
Question:
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Required:
In a memo, please respond to Alan, president of BBCC, on the following issues:
Activity-basedcosting
Have an activity-based costing analysis of each product (The-Bar, Alamonde and Salt-Lick) using the information provided from Exhibit 6 and the 20X7 actual costs incurred (Exhibit 4). The analysis should consist of a partial income statement showing sales and manufacturing costs (including direct materials and direct labour) for each product, including revised gross margin and gross margin percentage. Because the change in beginning and ending work-in-process and finished goods inventory amounts are negligible, these figures can be omitted from this analysis.
Discuss the results achieved above and explain why the gross margin(s) have changed. Finally, discuss how the activity-based approach provides a better allocation of costs and a more reliable gross margin.
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