Mountain Outfitters operates a large outdoor clothing and equipment store with tnree main product lines: clothing, equipment, and shoes. Mountain Outfitters 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 prícing 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: Mountain Outfitters Budgeted Product-Line Information For the Year Ended December 31, 2017 Clothing $1,440,000 $ 850,000 200 Equipment $1,840,000 $1,250,000 Shoes Total Revenues $720,000 $4,000,000 $2,500,000 Cost of merchandise Number of purchase orders placed Number of boxes received $400,000 125 175 500 450 200 350 1,000 16,000 Square feet of store space 4,500 10,000 1,500 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 Purchasing department expense Receiving department expense Customer support expense (cashiers and floor employees) Rent $ 320,000 210,000 250,000 240,000 100,000 General store advertising Store manager's salary 125,000 $1,245,000
Mountain Outfitters operates a large outdoor clothing and equipment store with tnree main product lines: clothing, equipment, and shoes. Mountain Outfitters 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 prícing 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: Mountain Outfitters Budgeted Product-Line Information For the Year Ended December 31, 2017 Clothing $1,440,000 $ 850,000 200 Equipment $1,840,000 $1,250,000 Shoes Total Revenues $720,000 $4,000,000 $2,500,000 Cost of merchandise Number of purchase orders placed Number of boxes received $400,000 125 175 500 450 200 350 1,000 16,000 Square feet of store space 4,500 10,000 1,500 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 Purchasing department expense Receiving department expense Customer support expense (cashiers and floor employees) Rent $ 320,000 210,000 250,000 240,000 100,000 General store advertising Store manager's salary 125,000 $1,245,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Q.dentify 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
Transcribed Image Text:Mountain Outfitters operates
a large outdoor clothing and equipment store with tnree main product lines: clothing, equipment, and shoes.
Mountain Outfitters 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
prícing 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:
Mountain Outfitters Budgeted
Product-Line Information
For the Year Ended December 31, 2017
Clothing
$1,440,000
$ 850,000
200
Equipment
$1,840,000
$1,250,000
Shoes
Total
Revenues
$720,000
$4,000,000
$2,500,000
Cost of merchandise
Number of purchase orders placed
Number of boxes received
$400,000
125
175
500
450
200
350
1,000
16,000
Square feet of store space
4,500
10,000
1,500
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
Purchasing department expense
Receiving department expense
Customer support expense (cashiers and floor employees)
Rent
$ 320,000
210,000
250,000
240,000
100,000
General store advertising
Store manager's salary
125,000
$1,245,000
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