Patricia was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee golf...
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Patricia was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee golf items. Since the frisbee golf segment was new, she wasn't surprised to see a segment loss after allocating her selling, general, and administrative costs to the three product areas using one rate, based on percentage of sales revenue. After looking more closely, though, she realized the selling, general, and administrative costs came from three main activity areas and could be allocated using more specific rates based on cost drivers as follows. SG&A Costs Management salaries Facility costs Insurance and other Total Cost $51,300 21,600 8,000 900 1,800 Quantity of Cost Driver hours devoted to managing the lines square feet of space occupied Percentage of sales revenue If the frisbee golf line requires 25 hours of management time and 125 square feet of space, and it generates just 4% of total revenues for the shop, how much of these total SG&A costs were initially allocated to the golf line? Costs allocated $ How much of these costs would have been allocated had Patricia used activity-based rates? Costs allocated LA $ Patricia was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee golf items. Since the frisbee golf segment was new, she wasn't surprised to see a segment loss after allocating her selling, general, and administrative costs to the three product areas using one rate, based on percentage of sales revenue. After looking more closely, though, she realized the selling, general, and administrative costs came from three main activity areas and could be allocated using more specific rates based on cost drivers as follows. SG&A Costs Management salaries Facility costs Insurance and other Total Cost $51,300 21,600 8,000 900 1,800 Quantity of Cost Driver hours devoted to managing the lines square feet of space occupied Percentage of sales revenue If the frisbee golf line requires 25 hours of management time and 125 square feet of space, and it generates just 4% of total revenues for the shop, how much of these total SG&A costs were initially allocated to the golf line? Costs allocated $ How much of these costs would have been allocated had Patricia used activity-based rates? Costs allocated LA $
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To calculate the SGA costs initially allocated to the frisbee golf line using activitybased rates we... View the full answer
Related Book For
South Western Federal Taxation 2015
ISBN: 9781305310810
38th Edition
Authors: William H. Hoffman, William A. Raabe, David M. Maloney, James C. Young
Posted Date:
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