Books and Brew (BB) is a large city bookstore that sells books and
music CDs, 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 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 2019 were as
follows:
Purchasing department | $500,000 |
Receiving department | $449,000 |
Shelf-stocking employee salaries | $483,000 |
Cashiers and floor employee salaries | $147,000 |
2019 information about BB's product lines is also available:
Books | CDs | Cafe | |
Revenue | $3,921,000 | $2,390,000 | $787,000 |
Cost of merchandise | $2,690,000 | $1,681,000 | $575,000 |
Number of purchase orders placed | 2,660 | 2,570 | 2,000 |
Number of deliveries received | 1,480 | 1,500 | 1,490 |
Hours of shelf stocking time | 15,200 | 14,100 | 10,300 |
Number of items sold | 112,000 | 107,000 | 272,000 |
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 CDs in 2019?
You have entered that answer before | Incorrect. | Tries 3/6 | Previous Tries |
Part B [6 tries; 5 points]
If BB had used an activity-based costing system to allocate its
operating costs in 2019, how much would have been allocated to
Books? For cashiers and floor employee salaries, use number of
items sold as the cost driver; for the other three cost categories,
it should be clear what the appropriate drivers are.
Part-A | Total Operating Cost | $ 1,579,000 | =500000+449000+483000+147000 |
Total Number of units sold | 491,000 | =112000+107000+272000 | |
Allocation rate | $ 3.22 | =1579000/491000 | |
Operating costs allocated to CDs in 2019 | $ 344,540 | =107000*3.22 | |
Part-B | A | B | A/B | ||
Cost $ | Total Driver Base | Allocation rate | Allocation Base | ||
Purchasing department | 500,000 | 7,230 | 69.16 | Per number of purchase order placed | |
Receiving department | 449,000 | 4,470 | 100.45 | Per number of deliveries received | |
Shelf-stocking employee salaries | 483,000 | 39,600 | 12.20 | Per hour of shelf stocking time | |
Cashiers and floor employee salaries | 147,000 | 491,000 | 0.30 | Per number of item sold | |
Amount $ | |||||
Purchasing department | 177,741 | =2570*69.16 | |||
Receiving department | 150,675 | =1500*100.45 | |||
Shelf-stocking employee salaries | 172,020 | =14100*12.2 | |||
Cashiers and floor employee salaries | 32,100 | =107000*0.3 | |||
Operating costs allocated to books | 532,536 | ||||
Working: | ||||
A | B | A/B | ||
Cost $ | Driver Base | Allocation rate | Allocation Base | |
Purchasing department | 500,000 | =2660+2570+2000 | 69.16 | Per number of purchase order placed |
Receiving department | 449,000 | =1480+1500+1490 | 100.45 | Per number of deliveries received |
Shelf-stocking employee salaries | 483,000 | =15200+14100+10300 | 12.20 | Per hour of shelf stocking time |
Cashiers and floor employee salaries | 147,000 | =112000+107000+272000 | 0.30 | Per number of item sold |
Books and Brew (BB) is a large city bookstore that sells books and music CDs, and...
Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 cost of merchandise 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 2019 were as follows: Purchasing...
Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 cost of merchandise 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 2019 were as follows: $485,000...
Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 cost of merchandise 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 2019 were as follows: $485,000...
Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 cost of merchandise 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 2019 were as follows: $485,000...
Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 cost of merchandise 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 2019 were as follows: $485,000...
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I need help with part B of this equation please!!! Books and Brew (BB) is a large city bookstore that sells books and music CDs, 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 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...
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