Question

Family Supermarkets has decided to increase the size of its Lansing store. It wants information about the profitability of its individual product lines: meats, fresh produce, and packaged food. The following data is for the year 2018 for each product line: Meats Fresh Produce Packaged Foods Revenue $800,000 $830,000 $485,000 Cost of goods sold $600,000 $590,000 $365,000 purchase orders 280 327 151 hours of stocking shelves 202 2,145 1,121 items sold 310,000 430,000 140,000 The Company also provides the following information for 2018 for its three support activities: Support Activity Budgeted Cost Cost Driver Ordering $108,000 purchase orders Shelf stocking $83,000 hours of stocking shelves Customer support $157,000 items sold REQUIRED [ROUND ALL OVERHEAD RATES TO TWO DECIMAL PLACES AND ALL ALLOCATIONS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) Family Supermarkets currently uses a single-driver system to allocate period costs to its product lines. The single driver that is used is the Cost of Goods Sold for each product line. Using this system, compute the allocation to Meats.

Answer 1

Overhead rate = Total budgeted cost/Total cost of goods sold

Total budgeted cost = $108000 + $83000 + $157000 = $348000

Total cost of goods sold = $600000 + $590000 + $365000 = $1555000

Overhead rate = $348000/$1555000 = 22.38% of cost of goods sold

Allocation to Meats = 22.38% x $600000 = $134280