Question

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 of pricing decisions. BB's operating costs for 2019 were as follows: Purchasing department $482,000 $445,000 Receiving department Shelf-stocking employee salaries Cashiers and floor employee salaries $494,000 $120,000 2019 information about BB's product lines is also available: Books CDs Cafe Revenue $4,122,000 $2,605,000 $826,000 Cost of merchandise $2,965,000 $1,911,000 $565,000 Number of purchase orders placed 2,760 2,470 1,880 Number of deliveries received 1,260 1,820 1,480 Hours of shelf stocking time 15,500 13,300 10,900 Number of items sold 135,000 110,000 279,000 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 Books in 2019? 396,900 You are correct. Previous Tries Your receipt no. is 159-4125 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 the cafe? 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. Submit Answer Tries 0/6

Answer 1

ABC Costing Part B Cost allocated to Cafe in 2019 Purchasing department Receiving department Shelf stocking employees salaries Cashiers and employees salary Overheads applied $127,445 $144,433 $135,596 $64,170 $471,644 Answer Working notes: Calculation of Activity rates Activity Purchasing department Receiving department Shelf stocking employees salaries Cashiers and employees salary Total budgeted overheads Total Overheads $482,000 $445,000 $494,000 $120,000 $1,541,000 Total Activities 7,110 4,5601 39,700 524,000 Activity rate $67.79 per purchase order $97.59 per deliveries received $12.44 per hour of shelf stock timing $0.23 per item sold Allocation of Overheads - ABC method Cafe Activity Activity rate Activities used Allocated Cost Purchasing department $67.79 1,880 $127,4451 Receiving department $97.59 $144,433 Shelf stocking employees salaries $12.44 10,900 $135,596 Cashiers and employees salary $0.23 279,000 $64,170 Total Overheads allocated $471,644 1,480