Super Bookstore (SB)_Activity-based costing
Discuss how the court will have to manage the issues you selected
July 6, 2020Laurentian Lodge_CVP Analysis
July 6, 2020Super Bookstore (SB)_Activity-based costing
Super Bookstore (SB) is a large city bookstore that sellsbooks and music CDs, and has a café. 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 Bookstore
Product Line Information
For the Year Ended December 31,2010
Books CDs Café
Revenues $3,720,480 $2,315,360 $736,216
Cost ofMerchandise $2,656,727 $1,722,311 $556,685
Cost of CaféCleaning — — $ 18,250
Number of Purchase ordersPlaced 2,800 2,500 2,000
Number of Deliveries Received 1,400 1,700 1,600
Hours of Shelf Stocking Time 15,000 14,000 10,000
Itemssold 124,016 115,768 368,108
Super Bookstore incurred the following Selling, General& Administration costs:
Super Bookstore
Selling, General & Administrationcosts
For the Year Ended December 31,2010
Purchase DepartmentExpenses $474,500
Receiving DepartmentExpenses 432,400
Shelf Stocking LaborExpense 487,500
Customer Support Expense (cashier and flooremployees) 91,184
$1,485,584
1. 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.
