This is a cost allocation problem for a merchandising firm. Since merchandising

Question

This is a cost allocation problem for a merchandising firm. Since merchandising firms do not have overhead, the costs that you must allocate are the support costs, bu the allocation process is the same. Family Supermarkets has decided to increase the size of its Lansing store. It wants information about the profitability of its individual product lines: meats, fresh produce, and packa food. The following data is for the year 2012 for each product line: The Company also provides the following information for 2012 for its three support activities: REQUIRED [ROUND ALL OVERHEAD RATES TO THREE DECIMAL PLACES AND ALL ALLOCATIONS TO THE NEAREST DOLLAR.] Family Supermarkets currently uses a single-driver system to allocate period costs to its product lines. The single driver that is used is the the number of items sold of each product Using this system, compute the allocation to Meats. If Family Supermarkets instead used an activity-based costing system to allocate period costs, with the cost pools and cost drivers listed in the tables above, how much would be allocated to Packaged Foods?

Explanation / Answer

Total items sold = 307000 cost of goods = 600000 so cost allocated = 600000/307000 =1.954 $ is the 1st answer 2> orders =149 hours = 1098 sold items = 127000 so per order cost = 127000 /127000 =1 per hour =78000/127000 =0.614 per support = 184000/127000 =1.44 so allocated costs = (1+0.614+1.44) =3.05$ is the 2nd answer

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