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Super Bookstore (SB)_Activity-based costing

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Question;Super Bookstore (SB) is a large city bookstore that sellsbooks and music CDs, and has a caf?. SB operates at capacityand allocates selling, general and administration (S, G & A)costs to each product line using the cost of merchandise of eachproduct line. SB wants to optimize the pricing and cost managementof each product line. SB is wondering if its accounting system isproviding it with the best information for making suchdecisions.Super BookstoreProduct Line InformationFor the Year Ended December 31,2010 Books CDs Caf?Revenues $3,720,480 $2,315,360 $736,216Cost ofMerchandise $2,656,727 $1,722,311 $556,685Cost of Caf?Cleaning --- --- $ 18,250Number of Purchase ordersPlaced 2,800 2,500 2,000Number of Deliveries Received 1,400 1,700 1,600Hours of Shelf Stocking Time 15,000 14,000 10,000Itemssold 124,016 115,768 368,108Super Bookstore incurred the following Selling, General& Administration costs:Super BookstoreSelling, General & AdministrationcostsFor the Year Ended December 31,2010Purchase DepartmentExpenses $474,500Receiving DepartmentExpenses 432,400Shelf Stocking LaborExpense 487,500Customer Support Expense (cashier and flooremployees) 91,184 $1,485,5841. Suppose Super bookstore uses cost of merchandise toallocate all S, G & A costs. Prepare product line and totalcompany income statements.2. Identify an improved method for allocating costs to thethree product lines. Explain. Use the method for allocating S, G& A costs that you propose to prepare new product line andtotal company income statements. Compare your results to theresults in 1.

 

Paper#37319 | Written in 18-Jul-2015

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