Giardin Outdoors is a recreational goods retailer with two divisions: Online and Stores. The two divisions both use the services of the corporate Finance and Accounting (F and A) Department. Annual costs of the F and A Department total $5.230 million a year. Managers in the two operating divisions are measured based on division operating profits. The following selected data are available for the two operating divisions: Revenues ($000) Transactions (000) Online $ 75,300 1,366.5 Stores 41,100 433.5 Required: What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis? What is the F and A cost that is charged to each division if the the number of transactions is used as the allocation basis?
Giardin Outdoors is a recreational goods retailer with two divisions: Online and Stores. The two divisions both use the services of the
The following selected data are available for the two operating divisions:
| Revenues ($000) |
Transactions (000) |
|
|---|---|---|
| Online | $ 75,300 | 1,366.5 |
| Stores | 41,100 | 433.5 |
Required:
-
What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis?
-
What is the F and A cost that is charged to each division if the the number of transactions is used as the allocation basis?
Joint costs means the costs incurred in producing multiple products simultaneously from the same raw material or input process.
The direct method of cost allocation is a way of assigning costs to products, departments, or projects without redistributing any costs among different service departments.
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