The Stately Retail Group owns the EzyShop chain of discount department stores. The EzyShop store in Bondi Junction consists of several departments. The revenues and costs for each department are recorded separately, and department managers are held responsible for these results. Frieda Schmidt manages the Menswear Department. Required: Classify each of the costs listed below as:
(a) A direct cost of the Menswear Department.
(b) An indirect cost of the Menswear Department.
(c) A variable cost (assuming the number of items sold is the cost driver).
(d) A fixed cost (in relation to the number of items sold).
(e) A controllable cost for Frieda.
(f) An uncontrollable cost for Frieda.
Costs:
1. The salary of the manager of the Bondi Junction store.
2. Salaries of the sales staff in the Menswear Department.
3. The cost of advertising men’s shirts in a nationwide marketing campaign produced at EzyShop h. office in Sydney.
4. Rent paid by the Bondi Junction store, which is allocated to individual departments based on floor ea.
5. Cost of the shirts sold in the Menswear Department.
6. Wages of store security staff, allocated on the basis of sales revenue.
7. Cost of obsolete stock written off or written down at the end of each year. Obsolescence is caused by changing customer tastes.
8. Cost of the computerised inventory management system administered at EzyShop’s head office.
9. Cost of staff bonuses (these are paid based on sales revenue achieved).
10. Cost of stock stolen from Menswear at the Bondi Junction store.
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