Question

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.

January 2018 Budgeted Cost-Driver Cost Driver Rate Number of purchase orders $ 94 B Number of deliveries $ 84 Hours of stocking time $ 22.00 January 2018 Budgeted Amount of Cost Driver Used Soft Fresh Packaged Drinks Snacks Food Activity Ordering Delivery Shelf-stocking Customer support 12 24 1165 22174 Number of items sold $ 0.23 4,600 34,200 10,600

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.

Answer 1

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