Mountain Outfitters Budgeted Product-Line Information For the Year Ended December 31, 2017 Clothing Equipment Shoes Total Revenues $1,440,000 $1,840,000 $1,250,000 S720,000 $400,000 $4,000,000 $2,500,000 Cost of merchandise $ 850,000 Number of purchase orders placed 200 125 175 500 Number of boxes received 450 200 350 1,000 Square feet of store space 4,500 10,000 1,500 16,000 For 2017, Mountain Outfitters budgets the following selling, general, and administration costs: Mountain Outfitters Selling, General, and Administration (S, G & A) Costs For the Year Ended December 31, 2017 $ 320,000 Purchasing department expense Receiving department expense Customer support expense (cashiers and floor employees) 210,000 250,000 Rent 240,000 General store advertising Store manager's salary 100,000 125,000 $1,245,000 Required 1. Suppose Mountain Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare bud- geted 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. 3. Write a memo to Mountain Outfitters management describing how the improved system might be useful for managing the store.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity-based costing, activity-based management, merchandising. Mountain Outtters operates a large outdoor clothing and equipment store with three main product lines: clothing, equipment, and shoes. Mountain Outtters 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. Store manager Aaron Budd gathers the following information regarding the three product lines:
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 18 images
