Question - Books and Brew (BB) is a large city bookstore that sells books and music CD's, and also has a cafe. Currently, BB uses a single-driver system to allocate its operating costs to each of its three product lines, using the number of items sold as the single cost driver. But BB's management is concerned that this allocation system may not be providing the best information for making a variety of pricing decisions. BB's operating costs for 2017 were as follows:
Purchasing department - $453,000
Receiving department - $445,000
Shelf-stocking employee salaries - $465,000
Cashiers and floor employee salaries - $109,000
2017 information about BB's product lines is also available:
|
|
Books
|
CD's
|
Cafe
|
|
Revenue
|
$3,646,000
|
$2,620,000
|
$800,000
|
|
Cost of merchandise
|
$2,575,000
|
$1,893,000
|
$575,000
|
|
Number of purchase orders placed
|
2,660
|
2,420
|
1,940
|
|
Number of deliveries received
|
1,280
|
1,790
|
1,660
|
|
Hours of shelf stocking time
|
14,100
|
13,100
|
12,000
|
|
Number of items sold
|
125,000
|
111,000
|
250,000
|
If BB had used an activity-based costing system to allocate its operating costs in 2017, how much would have been allocated to CD's?