Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

Cost allocation with a non-financial variable, retailing

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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1

Gross margin percentage Product contribution to revenue %

5.12
Cost allocation with a non-financial variable, retailing.
(15–20 min)

1 and 2

Breakfast
cereal
Dairy
product
Paper
towels

Toothpaste
Revenue Cost of goods sold Gross margin
Goods-handling cost Product contribution
€82 56 26 12
€14
€64 52 12 6
€6
€36 26 10 12
€(2)
€100 74 26 6
€20 Rankings on gross margin percentage and a product contribution to revenue percentage are
Gross margin percentage
Product contribution to revenue %
1. Breakfast cereal 31.7%
2. Paper towels
27.8%
3. Toothpaste
26.0%
4. Dairy product
18.7%
1. Toothpaste
20%
2. Breakfast cereal 17.1%
3. Dairy product
9.4%
4. Paper towels
−5.5%

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
3
Assigning the goods-handling costs to each product
a
Changes the rankings in terms of profitability.
b
Makes high-volume (cubic feet) products relatively less profitable than low- volume products. This information is useful in product-emphasis decisions.
5.13

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