Jessica owns a small department store in a metropolitan area. For twenty years, the accountant has...

Question

Question

Jessica owns a small department store in a metropolitan area. For twenty years, the accountant has applied overhead to the various departments—Women’s Apparel, Men’s Apparel, Cosmetics, Housewares, Shoes, and Electronics—based on the basis of employee hours worked. Jessica’s daughter, who is an accounting student at a local university, has suggested her mother should consider using activity-based costing (ABC). In an attempt to implement ABC, Jessica and her daughter have identified the following activities. (9 pts)

Instructions

Determine a cost driver for each of the activities listed below.

Cost Pool Cost Driver

a. Placing orders ______________________________

b. Stocking merchandise ______________________________

c. Waiting on customers ______________________________

d. Janitorial and maintenance ______________________________

e. Training employees ______________________________

f. Administrative ______________________________

g. Advertising and Marketing ______________________________

h. Accounting and Legal Services ______________________________

i. Wrapping packages ______________________________

Answer 1

Answer #1

Cost Pool	Cost Driver
a. Placing orders	number of orders; volume of individual orders
b. Stocking merchandise	number of orders; dollar volume of orders
c. Waiting on customers	number of customers; dollar volume of sales
d. Janitorial and Maintenance	square feet occupied; traffic through area
e. Training employees	total number of employees; number of new employees
f. Administrative	number of employees; dollar volume of business
g. Advertising and Marketing	number of ad campaigns
h. Accounting and Legal Services	dollar volume of sales
i. Wrapping packages	number of packages

Answer 2