Required:

1. Apply an activity-based costing system and recalculate the operating income of the three departments.

2. Based on your analysis in part (1), write a short memo to management discussing the revised operating income of the three departments and which numbers (yours or the one given above) management should use for decision making and for department performance evaluation.

Question 2 - Friendly Grocer paciagod frodu lint 512,400 1 praduct caksgory comes it Shelf space costs consist of store occupancy costs such as depreciation on the bailding and fixtures, utilities, store maintenance, property taxes, and insurance. Beverages make up 25 pereent of the shelf space, dairy and meats make up 35 percent of the space and canned and packaged goods make up 40 percent of the shelf space. Handling costs consist of the labor required to stock the shelves and remove outated products. The beverage suppliers (Coca-Cola, Pepsi, ete.) provide the laboe to shelve their products (i.e., the beverage delivery people stock their products on the shelf). Dairy and meats labor costs for stocking are three-quarters of the handing costs; canned and package foods' labor and handling costs are one quarter of the total. Coupon costs consist of the labor costs to process the redeemed coupons. Dairy and meats do not have any coupons. Twenty percent of the coupons redeemed are for beverages and 80 percent are for packaged and canned foods. Shrinkage consists of the cost of products spoiled, broken, and stolen. Shrinkage by product category comes to The remaining indirect costs are allocated based on cost of goods sold. Required: 1. Apply an activity-based costing system and recalculate the operating income of the three departments. 2. Based on your analysis in part (1), write a short memo to management discussing the revised operating income of the three departments and which numbers (yours or the one given above) mansgement should use for decision making and for department performance evaluation. Question 2 - Friendly Grocer paciagod frodu lint 512,400 1 praduct caksgory comes it Shelf space costs consist of store occupancy costs such as depreciation on the bailding and fixtures, utilities, store maintenance, property taxes, and insurance. Beverages make up 25 pereent of the shelf space, dairy and meats make up 35 percent of the space and canned and packaged goods make up 40 percent of the shelf space. Handling costs consist of the labor required to stock the shelves and remove outated products. The beverage suppliers (Coca-Cola, Pepsi, ete.) provide the laboe to shelve their products (i.e., the beverage delivery people stock their products on the shelf). Dairy and meats labor costs for stocking are three-quarters of the handing costs; canned and package foods' labor and handling costs are one quarter of the total. Coupon costs consist of the labor costs to process the redeemed coupons. Dairy and meats do not have any coupons. Twenty percent of the coupons redeemed are for beverages and 80 percent are for packaged and canned foods. Shrinkage consists of the cost of products spoiled, broken, and stolen. Shrinkage by product category comes to The remaining indirect costs are allocated based on cost of goods sold. Required: 1. Apply an activity-based costing system and recalculate the operating income of the three departments. 2. Based on your analysis in part (1), write a short memo to management discussing the revised operating income of the three departments and which numbers (yours or the one given above) mansgement should use for decision making and for department performance evaluation