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Question - Books and Brew (BB) is a large city bookstore that sells books and music CD's, and also has a cafe. Currently, BB uses a single-driver system to allocate its operating costs to each of its three product lines, using the number of items sold as the single cost driver. But BB's management is concerned that this allocation system may not be providing the best information for making a variety of pricing decisions. BB's operating costs for 2017 were as follows:
Purchasing department - $453,000
Receiving department - $445,000
Shelf-stocking employee salaries - $465,000
Cashiers and floor employee salaries - $109,000
2017 information about BB's product lines is also available:
Books
CD's
Cafe
Revenue
$3,646,000
$2,620,000
$800,000
Cost of merchandise
$2,575,000
$1,893,000
$575,000
Number of purchase orders placed
2,660
2,420
1,940
Number of deliveries received
1,280
1,790
1,660
Hours of shelf stocking time
14,100
13,100
12,000
Number of items sold
125,000
111,000
250,000
If BB had used an activity-based costing system to allocate its operating costs in 2017, how much would have been allocated to CD's?
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