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
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
| 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
flows
BACHELOR OF COMMERCE: ACCOUNTING YEAR 3 – ACADEMIC AND ASSESSMENT
CALENDAR (RD)
REGENT BUSINESS SCHOOL (RBS) – JANUARY 2021 18
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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