Multi-Store Limited is a small regional chain of supermarkets in the Northern Cape. The chain manages their accounting per store but in addition they run the Deli, Butchery and Goods sections as separate reporting cost centres. In addition they have two service departments the Finance Department that deals with the financial administration and the Inventory Department that deals with the ordering, delivery and warehousing of goods. They are currently reviewing the profitability and efficiency of the three cost centres and have adopted an Activity-Based-Costing (ABC) approach. The following information has been extracted from their accounting and activity records: The following Overheads are to be apportioned: Cost R Basis of allocation to cost centres Ordering costs 250 000 Number of order issued Goods Received Costs 320 000 Number of Goods Received Notes issued Management and Administration Costs 1 200 000 Rand value turnover Property costs 850 000 Square meters occupied Warehousing Costs 650 000 Number of Inventory Requests sent to warehouse Maintenance Costs 180 000 Number of maintenance requests In addition the Finance Department's costs will be allocated based on the gross cash flows of the departments and the inventory costs based on the total purchases of the year. The direct costs of the Finance Department were R675 000 and the direct costs of the Inventory Department R400 000. The following activities took place during the year Activity Deli Butchery Goods Finance Inventory Total Orders issued 520 370 5895 70 105 6960 Goods Received Notes 610 350 6000 80 100 7140 Turnover R1.5m R2.1m R10m Nil Nil R13.6m Square meters 500 300 4 100 100 1 000 6 000 Inventory requests 180 1 400 2 500 Nil Nil 4 080 Maintenance Requests 500 500 1945 15 40 3000 Gross Cash Flow R2.3m R3.7m R18m Nil Nil R24m Purchases R0.8m R1.6m R8m Nil Nil R10.4m Required Calculate the total overhead costs that are to be allocated to the Deli, Butchery and Goods retail departments.

Multi-Store Limited is a small regional chain of supermarkets in the Northern Cape. The chain manages their accounting per store but in addition they run the Deli, Butchery and Goods sections as separate reporting cost centres. In addition they have two service departments the Finance Department that deals with the financial administration and the Inventory Department that deals with the ordering, delivery and warehousing of goods. They are currently reviewing the profitability and efficiency of the three cost centres and have adopted an Activity-Based-Costing (ABC) approach. The following information has been extracted from their accounting and activity records: The following Overheads are to be apportioned: Cost R Basis of allocation to cost centres Ordering costs 250 000 Number of order issued Goods Received Costs 320 000 Number of Goods Received Notes issued Management and Administration Costs 1 200 000 Rand value turnover Property costs 850 000 Square meters occupied Warehousing Costs 650 000 Number of Inventory Requests sent to warehouse Maintenance Costs 180 000 Number of maintenance requests In addition the Finance Department's costs will be allocated based on the gross cash flows of the departments and the inventory costs based on the total purchases of the year. The direct costs of the Finance Department were R675 000 and the direct costs of the Inventory Department R400 000. The following activities took place during the year Activity Deli Butchery Goods Finance Inventory Total Orders issued 520 370 5895 70 105 6960 Goods Received Notes 610 350 6000 80 100 7140 Turnover R1.5m R2.1m R10m Nil Nil R13.6m Square meters 500 300 4 100 100 1 000 6 000 Inventory requests 180 1 400 2 500 Nil Nil 4 080 Maintenance Requests 500 500 1945 15 40 3000 Gross Cash Flow R2.3m R3.7m R18m Nil Nil R24m Purchases R0.8m R1.6m R8m Nil Nil R10.4m Required Calculate the total overhead costs that are to be allocated to the Deli, Butchery and Goods retail departments.

Principles of Accounting Volume 2

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ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

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Cost	R	Basis of allocation to cost centres
Ordering costs	250 000	Number of order issued
Goods Received Costs	320 000	Number of Goods Received Notes issued
Management and Administration Costs	1 200 000	Rand value turnover
Property costs	850 000	Square meters occupied
Warehousing Costs	650 000	Number of Inventory Requests sent to warehouse
Maintenance Costs	180 000	Number of maintenance requests

In addition the Finance Department's costs will be allocated based on the gross cash
flows of the departments and the inventory costs based on the total purchases of the year. The direct costs of the Finance Department were R675 000 and the direct costs of
the Inventory Department R400 000.
The following activities took place during the year

Activity	Deli	Butchery	Goods	Finance	Inventory	Total
Orders issued	520	370	5895	70	105	6960
Goods Received Notes	610	350	6000	80	100	7140
Turnover	R1.5m	R2.1m	R10m	Nil	Nil	R13.6m
Square meters	500	300	4 100	100	1 000	6 000
Inventory requests	180	1 400	2 500	Nil	Nil	4 080
Maintenance Requests	500	500	1945	15	40	3000
Gross Cash Flow	R2.3m	R3.7m	R18m	Nil	Nil	R24m
Purchases	R0.8m	R1.6m	R8m	Nil	Nil	R10.4m

Required
Calculate the total overhead costs that are to be allocated to the Deli, Butchery and
Goods retail departments.

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