Super Bookstore Analysis: Company Background Information (Case Study Sample)

Super Bookstore Analysis
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Institutional Affiliation
Company background information
Super Bookstore Company has three diverse product lines that are Café, books, and CDs. These three diverse departments usually produce income to the company and also incur several expenses. The details that concern these diverse operating expenditures such as the quantity of deliveries received and purchase orders requested, amount of hours to shelving stock time and the items sold are also accessible. At the present, the Super Bookstore Company is using the cost of products sold so as to apportion all the company indirect expenses. The major problem, in this particular case, is the aspect of distribution and selling costs to the correct or actual department as this is a significant problem since the Super Bookstore Company will not be able to comprehend about the definite income that is produced by a department which is necessary for the future strategic plans. In the long term, it will turn out to be complex in evaluating the unit that is profitable and non-profitable that is, determining the exact units to invest and wherever not to carry out investment. What is the suitable technique to be employed for apportioning the expenditure? What is the definite revenue that is produced by each department?
Super Bookstore Company analysis
Using the cost of products as the allotment criterion, approximately 54% of the indirect overheads are apportioned to the books unit, 35% of the indirect overheads to the music CDs unit and about 11% to the café unit. However, when examining every unit's activity, it is evident that additional 11% of the indirect overheads are being sustained by the café unit and extra floor labour is often used by café unit. By use of the old appropriation criteria, the income from operation of the book unit was found to be $264,115, for CDs music was found to be $74,657 and the cafe unit was said to be -$6,273 (Refer to Appendix A). According to this particular study, it was apparent that whilst this is contrasted to the other two units, the café unit was using high overheads because the old technique was shielding the amounts of loss that was created by the café unit but it allocates the expenses to the other two units.
By use of the ABC costing technique, the total cost was distributed basing on the cost driver and the activities that are accountable for such an activity. By executing this new technique, the quantity of operating revenue for the books units was evaluated as $546,850, for music CDs as $81,784 and the café units as -$296,135 (Refer to Appendix A). These amounts evidently indicate the outcome in varying the cost distribution technique. Seen from this particular analysis, it is apparent that the books unit is generating high-profit that is followed by the music CDs. Generally the aspect of Super Bookstore Company profitability has reduced essentially to the café unit that would not have been observed exclusively in the use of Activity Based Costing technique which offers more comprehensive data about the performance of every department.
Conclusions
Using the Activity Based Costing technique, it will be suitable for the Super Bookstore Company and the outcomes produced by them offer more efficient data. Apportioning expenditures basing on one specific cost driver cannot be justified because one unit might make extra acquisitions, and other departments...