1. This is a cost allocation problem for a merchandising firm. Since merchandising firms do not have overhead, you must allocate "operating costs" instead of "overhead costs." Also, the allocations in this problem are to a department, not to a product or job. Nonetheless, the allocation process is the same. Just follow the three steps used in the lectures:Read the problem and question carefully to determine the cost driver.
2. Compute the "overhead" rate-budgeted operating costs / budgeted driver.
3. Allocate to the specific department-overhead rate X driver for the specific department.

Remember that with activity-based costing (Part B), there is more than one driver and more than one rate, and the allocation to a department is the sum of several individual allocations.

you need to answer partA and partB

Books and Brew (BB) is a large city bookstore that sells hooks and music CD's, and also has a cafe. Currently, BB uses a single-driver system to allocate its operating costs to each of its three product lines, using the the number of items sold as the single cost driver. But BB's management is concerned that this allocation system may not be providing the best information for making a variety of pricing decisions. BB's operating costs for 2016 were as follows: Purchasing department $454,000 Receiving department $446,000 Shelf-stocking employee salaries $477,000 Cashiers and floor employee salaries $106,000 2016 information about BB's product lines is also available: Books CD's Cafe Revenue $3,539,000 $2,203,000 $815,000 Cost of merchandise $2,517,000 $1,616,000 $555,000 Number of purchase orders placed Number of deliveries received Hours of shelf stocking time Number of items sold 135,000 102,000 275,000 REQUIRED [ROUND ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] Part A [6 tries; 5 points] Using BB's single-driver system to allocate its operating costs, how much was allocated to CD's in 2016? me: Tries 0/6 Part B [6 tries; 5 points] If BB had used an activity-based costing system to allocate its opearting costs in 2016, how much would have been allocated to the cafe? For cashiers and oor employee salaries, use number of items sold as the cost driver. For all other costs, the appropriate drivers should be clear