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Travel Outfitters operates a large outdoor clothing and equipment store with three main product lines: clothing, equipment, and shoes. Travel Outfitters operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise of each product line. The company wants to optimize the pricing and cost management of each product line and is wondering if its accounting system is providing it with the best information for making such decisions. Requirement 1. Suppose Travel Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Revenues Cost of merchandise Selling, general and administrative costs Total costs Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing $ $ 1,360,000 $ Store manager Alex Baxter gathers the following information regarding the three product lines: (Click the icon to view the product line information.) 808,500 436,590 1,245,090 For 2017, Travel Outfitters budgets the following selling, general, and administration costs: (Click the icon to view the selling, general, and administration costs.) Read the requirements. 114,910 $ Equipment 1,790,000 $ 1,200,500 648,270 1,848,770 (58,770) $ Shoes 810,000 $ 441,000 238,140 679,140 130,860 $ Total 3,960,000 2,450,000 1,323,000 3,773,000 187,000 Operating income (loss) Requirement 2. Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new budgeted product line and total company income statements. Compare your results to the results in requirement 1. An improved method for allocating costs to the three product lines is activity based costing. This method is more appropriate because of the variety of products and large dollar value of indirect costs. Begin by identifying the most appropriate cost driver for each cost category. Select the best explanation for the use of each cost driver. (Use the cost of merchandise if the expense is not tied to any of the other cost drivers.) F(Click the icon to view the explanation responses.) Expense Purchasing department expense Receiving department expense Customer support expense Rent General store advertising Store manager's salary Cost driver Number of purchase orders Number of boxes received Revenue dollars Square feet of store space Revenue dollars Cost of merchandise Explanation D B E F E G Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing Equipment Revenues Cost of merchandise Selling, general and administrative costs. Total costs Operating income (loss) Shoes Total Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing Equipment Revenues Cost of merchandise Selling, general and administrative costs. Total costs Operating income (loss) Shoes Total Data Table Travel Outfitters Selling General, and Administration (S, G, & A) Costs For the Year Ended December 31, 2017 Purchasing department expense Receiving department expense Customer support expense (cashiers and floor employees) Rent General store advertising Store manager's salary Total Cost of merchandise Selling, general and administrative costs Total costs Operating income (loss) Print Done remaining Enter any number in the edit fields and then click Check Answer. 2 parts $ $ 334,800 273,000 198,000 340,000 79,200 98,000 1,323,000 x Sto BB For Re of allo i Requirement 1. Suppose Travel Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements. 2. Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new budgeted product-line and total company income statements. Compare your results to the results in requirement 1. (Customer support and advertising have been linked very closely with store sales.) 3. Write a memo to Travel Outfitters management describing how the improved system might be useful for managing the store. Travel Outfitters Budgeted Product-Line Information For the Year Ended December 31, 2017 Revenues Cost of merchandise Number of purchase orders placed Number of boxes received Square feet of store space Total Clothing Equipment Shoes $ 1,360,000 $ 1,790,000 $ 810,000 $3,960,000 $ 808,500 $ 1,200,500 $441,000 $ 2,450,000 220 460 4,300 Print Done 130 220 14,000 190 370 1,700 540 1,050 20,000 X Answer ? Travel Outfitters operates a large outdoor clothing and equipment store with three main product lines: clothing, equipment, and shoes. Travel Outfitters operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise of each product line. The company wants to optimize the pricing and cost management of each product line and is wondering if its accounting system is providing it with the best information for making such decisions. Requirement 1. Suppose Travel Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Revenues Cost of merchandise Selling, general and administrative costs Total costs Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing $ $ 1,360,000 $ Store manager Alex Baxter gathers the following information regarding the three product lines: (Click the icon to view the product line information.) 808,500 436,590 1,245,090 For 2017, Travel Outfitters budgets the following selling, general, and administration costs: (Click the icon to view the selling, general, and administration costs.) Read the requirements. 114,910 $ Equipment 1,790,000 $ 1,200,500 648,270 1,848,770 (58,770) $ Shoes 810,000 $ 441,000 238,140 679,140 130,860 $ Total 3,960,000 2,450,000 1,323,000 3,773,000 187,000 Operating income (loss) Requirement 2. Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new budgeted product line and total company income statements. Compare your results to the results in requirement 1. An improved method for allocating costs to the three product lines is activity based costing. This method is more appropriate because of the variety of products and large dollar value of indirect costs. Begin by identifying the most appropriate cost driver for each cost category. Select the best explanation for the use of each cost driver. (Use the cost of merchandise if the expense is not tied to any of the other cost drivers.) F(Click the icon to view the explanation responses.) Expense Purchasing department expense Receiving department expense Customer support expense Rent General store advertising Store manager's salary Cost driver Number of purchase orders Number of boxes received Revenue dollars Square feet of store space Revenue dollars Cost of merchandise Explanation D B E F E G Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing Equipment Revenues Cost of merchandise Selling, general and administrative costs. Total costs Operating income (loss) Shoes Total Prepare a new budgeted product-line and total company income statements using the above method of allocating S, G & A costs. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar. Use parentheses or a minus sign to enter losses.) Travel Outfitters Budgeted Income Statement For the Year Ended December 31, 2017 Clothing Equipment Revenues Cost of merchandise Selling, general and administrative costs. Total costs Operating income (loss) Shoes Total Data Table Travel Outfitters Selling General, and Administration (S, G, & A) Costs For the Year Ended December 31, 2017 Purchasing department expense Receiving department expense Customer support expense (cashiers and floor employees) Rent General store advertising Store manager's salary Total Cost of merchandise Selling, general and administrative costs Total costs Operating income (loss) Print Done remaining Enter any number in the edit fields and then click Check Answer. 2 parts $ $ 334,800 273,000 198,000 340,000 79,200 98,000 1,323,000 x Sto BB For Re of allo i Requirement 1. Suppose Travel Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements. 2. Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new budgeted product-line and total company income statements. Compare your results to the results in requirement 1. (Customer support and advertising have been linked very closely with store sales.) 3. Write a memo to Travel Outfitters management describing how the improved system might be useful for managing the store. Travel Outfitters Budgeted Product-Line Information For the Year Ended December 31, 2017 Revenues Cost of merchandise Number of purchase orders placed Number of boxes received Square feet of store space Total Clothing Equipment Shoes $ 1,360,000 $ 1,790,000 $ 810,000 $3,960,000 $ 808,500 $ 1,200,500 $441,000 $ 2,450,000 220 460 4,300 Print Done 130 220 14,000 190 370 1,700 540 1,050 20,000 X Answer ?
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Related Book For
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan
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