Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Uli Boxes is a retailer with 3 product lines, with each product line is supplied by a single supplier. Under its traditional costing method the

image text in transcribedimage text in transcribed

Uli Boxes is a retailer with 3 product lines, with each product line is supplied by a single supplier. Under its traditional costing method the store support (i.e.ordering and delivery costs) are allocated based on working-hours spent by warehouse staff and the following is the current analysis of the profit of each product line:

Details

Product Line 1 $

Product Line 2 $

Product Line 3 $

Total $

Revenue

65,000

85,000

50,000

200,000

Cost of sales

40,000

65,000

25,000

130,000

Store Support

12,000

15,000

10,000

37,000

Total costs

52,000

80,000

35,000

167,000

Profit before other overheads allocated

13,000

5,000

15,000

33,000

Profit margin

20%

6%

30%

17%

Uli Boxes wants to improve profitability and it has therefore decided that it should drop product line 2 as it has the lowest profit before other overheads allocated.

You have been asked to complete an analysis based on Activity-Based Costing and you have obtained the following information:

Number of activities

Product Line 1

Product Line 2

Product Line 3

Orders placed

30

15

55

Deliveries made

40

20

40

Cost per activity

Ordering

$ 120.00

Delivery

$ 250.00

What would be the profit margin (before other overheads allocated) under Activity-Based Costing for Product Line 2 (round your answer to the nearest whole number)?

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

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

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

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

Get Started

Recommended Textbook for

Intermediate Accounting Volume 1

Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick

7th Edition

1260306747, 978-1260306743

More Books

Students also viewed these Accounting questions

Question

4. Similarity (representativeness).

Answered: 1 week ago