Family Supermarkets has decided to increase the size of its Lansing store. It wa

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 2012 for each product line:



Meats Fresh Produce Packaged Foods
Revenue $800,000 $830,000 $500,000
Cost of goods sold $600,000 $590,000 $380,000
purchase orders 265 330 149
hours of stocking shelves 201 2,067 1,098
items sold 307,000 431,000 127,000



The Company also provides the following information for 2012 for its three support activities:



Support Activity Budgeted Cost Cost Driver
Ordering $127,000 purchase orders
Shelf stocking $78,000 hours of stocking shelves
Customer support $184,000 items sold





Part A
Family Supermarkets currently uses a single-driver system to allocate period costs to its product lines. The single driver that is used is the the number of items sold of each product line. Using this system, compute the allocation to Meats.?


Part B
If Family Supermarkets instead used an activity-based costing system to allocate period costs, with the cost pools and cost drivers listed in the tables above, how much would be allocated to Packaged Foods?

Explanation / Answer

Part A Family Supermarkets currently uses a single-driver system to allocate period costs to its product lines. The single driver that is used is the the number of items sold of each product line. Using this system, compute the allocation to Meats.? Total Overhead = 127,000 + 78,000 + 184,000 = 389,000 Total items sold = 307,000 + 431,000 + 127,000 = 865,00 Overhead rate = $389,000/865,000 items = $0.45 per item Allocation to meat: 307,000*.45 = $138,150 Part B If Family Supermarkets instead used an activity-based costing system to allocate period costs, with the cost pools and cost drivers listed in the tables above, how much would be allocated to Packaged Foods? Ordering: $127,000/744 orders = $170.70 per order Stocking: $78,000/3366 hours = $23.17 per hour Customer support: $184,000/865,000 items = $0.21 per item Allocation to packaged goods = 170.70*149 + 23.17*1098 + .21*127,000 = $77544.96

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.