Appliance King is an electronics company providing home equipment. Its business is divided into three divisions,...

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Appliance King is an electronics company providing home equipment. Its business is divided into three divisions, Large appliances, Medium appliances and Small appliances. The following information has been provided: Large appliances Medium Income Direct costs Staff members Floorspace in m² Indirect Costs Rent Electricity Marketing Additional Information Revenue Direct costs Rent Electricity Marketing Net profit Net profit margin appliances R3 480 000 R2 200 000 20 1200 Large appliances 3 480 000 (2 200 000) (216 000) (265 000) (146 667) 652 333 18.75% R3 300 000 R2 000 000 15 1000 Medium appliances R540 000 R530 000 R400 000 Small appliances The company's costing team have used ABC as method of costing and arrived at a cost allocation and contribution statement below. Small appliances Total 3 300 000 (2 000 000) (180 000) (198 750) (133 333) 787 917 23.88% R3 000 000 R1 800 000 3 000 000 (1 800 000) (144 000) 5 (66 250) (120 000) 869 750 28.99% 800 9 780 000 (6 000 000) (540 000) (530 000) (400 000) 2310 000 23.62% Required: a) Indicate with calculation what the cost drivers are for each of the fixed costs allocated. (3) b) Interpret the different margins and make recommendations regarding each of the different divisions. (8) Appliance King is an electronics company providing home equipment. Its business is divided into three divisions, Large appliances, Medium appliances and Small appliances. The following information has been provided: Large appliances Medium Income Direct costs Staff members Floorspace in m² Indirect Costs Rent Electricity Marketing Additional Information Revenue Direct costs Rent Electricity Marketing Net profit Net profit margin appliances R3 480 000 R2 200 000 20 1200 Large appliances 3 480 000 (2 200 000) (216 000) (265 000) (146 667) 652 333 18.75% R3 300 000 R2 000 000 15 1000 Medium appliances R540 000 R530 000 R400 000 Small appliances The company's costing team have used ABC as method of costing and arrived at a cost allocation and contribution statement below. Small appliances Total 3 300 000 (2 000 000) (180 000) (198 750) (133 333) 787 917 23.88% R3 000 000 R1 800 000 3 000 000 (1 800 000) (144 000) 5 (66 250) (120 000) 869 750 28.99% 800 9 780 000 (6 000 000) (540 000) (530 000) (400 000) 2310 000 23.62% Required: a) Indicate with calculation what the cost drivers are for each of the fixed costs allocated. (3) b) Interpret the different margins and make recommendations regarding each of the different divisions. (8)

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a Cost Drivers for Fixed Costs Allocation 1 Rent Cost Driver Floorspace in m Calculation Rent Allocation Floorspace for Division Total Floorspace Tota... View the full answer