The Troy store of Carlson Mart, a chain of small neighborhood convenience stores, has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2018. Carlson Mart has three product categories: soft drinks (35% of cost of goods sold [COGS]), fresh snacks (25% of COGS), and packaged food (40% of COGS). The following table shows the four activities that consume indirect resources at the Troy store, the cost drivers and their rates, and the cost-driver amount budgeted to be consumed by each activity in January 2018.
Each successive month, the budgeted cost-driver rate decreases by 0.3% relative to the preceding month. So, for example, February's budgeted cost-driver rate is 0.997 times January's budgeted cost-driver rate, and March's budgeted cost-driver rate is 0.997 times the budgeted February rate. Carlson Mart assumes that the budgeted amount of cost-driver usage remains the same each month.
Budgeted Cost-Driver Rates | |||||||||
Activity | January | February | March | ||||||
Ordering | 94 | 93.718 | 93.43685 | ||||||
Delivery | 84 | 83.748 | 83.49676 | ||||||
Shelf-stocking | 22 | 21.934 | 21.86820 | ||||||
Customer support | 0.23 | 0.22931 | 0.22862 | ||||||
Budgeted Costs for each activity and total budgeted indirect costs for March 2018 : | |||||||||
March-2018 Budget | Amount of cost drivers used | Cost allocated to each product | |||||||
Activity | Cost driver Rate | Soft drinks | Fresh snacks | Packaged Food | Soft drinks | Fresh snacks | Packaged Food | Total Cost per Budgeted Activity | |
Ordering | 93.43685 | 12 | 24 | 12 | 1,121 | 2,242 | 1,121 | 4,485 | |
Delivery | 83.49676 | 11 | 65 | 23 | 918 | 5,427 | 1,920 | 8,266 | |
Shelf-stocking | 21.86820 | 22 | 174 | 93 | 481 | 3,805 | 2,034 | 6,320 | |
Customer support | 0.22862 | 4,600 | 34,200 | 10,600 | 1,052 | 7,819 | 2,423 | 11,294 | |
Total Indirect Costs for March 2018 : | 30,365 | ||||||||
The Troy store of Carlson Mart, a chain of small neighborhood convenience stores, has a Kaizen...
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