Bigfoot, reported the following data for 2021

Gross Margin Income Statement	General Supermarkets	Drugstore Chains	Mom-and-Pop Single Stores	Bigfoot Total
Sales revenues	$3,758,000	$3,150,000	$1,980,000	$8,888,000
Cost of goods sold	3,600,000	3,000,000	1,800,000	8,400,000
Gross margin	$ 158,000	$ 150,000	$ 180,000	$488,000
Other operating costs				290,080
Operating income				$ 197,920
Gross Margin %	4.20%	4.76%	9.09%

For many years Bigfoot has used gross margin percentage [(sales revenue – cost of goods sold) / sales revenue] to evaluate the relative profitability of its market segments. You have recently been hired by Bigfoot as a business analyst and are considering allocating the “other operating costs” which are not currently allocated to market segments using a Job Costing or Activity-Based Costing (ABC) system.

Over the past few weeks you have met with all the key managers and several operations and sales staff and they agree that a job costing system would use a volume-based measure such as “cartons shipped to stores” while an ABC system would allocate using five key activities that drive other operating costs at Bigfoot.

Activity Area	Cost Driver
Order processing	Number of customer purchase orders
Line-item processing	Number of line items ordered by customers
Delivering to stores	Number of store deliveries
Cartons shipped to stores	Number of cartons shipped
Stacking of customer store shelves	Hours of shelf-stocking

Each customer order consists of one or more line items. A line item represents a single product (such as Diet Pepsi). Each product line item is delivered in one or more separate cartons. Each store delivery entails the delivery of one or more cartons of products to a customer. Bigfoot’s staff stacks cartons directly onto display shelves in customers’ stores. Currently, there is no additional charge to the customer for shelf-stocking and not all customers use Bigfoot for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2021 is as follows:

Activity	General Supermarkets	Drugstore Chains	Mom-and-Pop Single Stores	Total Cost of Activity
Orders processed (number)	140	360	1,500	$80,000
Line-items ordered (number)	1,960	4,320	15,000	63,840
Store deliveries made (number)	120	360	1,020	60,000
Cartons shipped to stores (number)	24,000	36,000	16,000	76,000
Shelf stocking (hours)	100	180	360	10,240
				$ 290,080

1. Compute a Job Costing rate using the “number of cartons shipped to stores” (round to two decimal places) and the ABC rates for each of the five activity areas which you and the managers at Bigfoot have identified.
2. Using the Job costing and ABC rates, allocate the $290,080 of “other operating costs” to each of the three market segments and find the Operating income for each market segment (use the tables provided below).

Job Costing based Income Statement

	General Supermarkets	Drugstore Chains	Mom-and-Pop Single Stores
Sales revenues	$3,758,000	$3,150,000	$1,980,000
Cost of goods sold	3,600,000	3,000,000	1,800,000
Gross margin	$ 158,000	$ 150,000	$ 180,000
Other operating costs
Operating income

ABC Allocations of “other operating costs”

Activity & Rate	General Supermarkets	Drugstore Chains	Mom-and-Pop Single Stores
TOTAL

ABC costing based Income Statement

Gross Margin Income Statement	General Supermarkets	Drugstore Chains	Mom-and-Pop Single Stores
Sales revenues	$3,758,000	$3,150,000	$1,980,000
Cost of goods sold	3,600,000	3,000,000	1,800,000
Gross margin	$ 158,000	$ 150,000	$ 180,000
Other operating costs
Operating income			Calculate the operating income percent (operating income / sales revenue) for each segment.

3. Calculate the operating income percent (operating income / sales revenue) for each segment.

Please give the calculation procedure for each step

Answer rating: 100% (QA)

1 Job Costing Rate Total Cost of Activity Number of Cartons ... View the full answer