Patricia was evaluating the profitability of her bike shop, which sells bicycles, skateboards, and frisbee...
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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 allucating her selling, general, and administrative costs to the threeproduct 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. If the frisbee golf line requires hours of management time and square feet of space, and it generates just of total revenues. for the shop, how much of these total SG&A costs were initially allocated to the golf line? SG&A Costs Total Cost Quantity of Cost Driver Management salaries $ hours devoted to managing the lines Facility costs square feet of space occupied Insurance and other Percentage of sales revenue Costs allocated $ How much of these costs would have been allocated had Patricia used activitybased rates?
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 allucating her selling, general, and administrative costs to the threeproduct 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.
If the frisbee golf line requires hours of management time and square feet of space, and it generates just of total revenues. for the shop, how much of these total SG&A costs were initially allocated to the golf line?
SG&A Costs
Total Cost
Quantity of Cost Driver
Management salaries
$
hours devoted to managing the lines
Facility costs
square feet of space occupied
Insurance and other
Percentage of sales revenue
Costs allocated
$
How much of these costs would have been allocated had Patricia used activitybased rates?
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