Pabbings is a national retailer of hardware and garden products. The merchandise in each store is organised into separate departments such as timber, electrical tools, lighting and garden products. Each department has a manager, responsible for ordering and managing enquiries about merchandise in their area. Staff in these managerial roles is paid a fixed weekly salary. Sales staff, however, is not allocated to specific departments and are largely casual employees, whose hours can be varied according to the expected level of sales activity in the store. These staff is paid an hourly rate plus a commission based on the sales revenue they generate. All other staff is also employed in casual positions so that their hours can be tailored to expect sales activity.
Required:
Consider the Parafield store and for each cost listed below, indicate which of the following classification best describes the cost. More than one classification may apply to the same cost item.
Cost classifications:
(a) Purchasing.
(b) Production/sales transaction.
(c) Marketing.
(d) Distribution.
(e) Customer support.
(f) Fixed cost.
(g) Variable cost (and suggest a possible cost driver for each cost).
(h) Controllable by department managers.
(i) Uncontrollable by department managers.
(j) Cost of merchandise inventory.
Costs:
1. Salaries of the staff working on the customer service desk.
2. Salaries of the sales staff.
3. Cost of plants purchased from a local nursery.
4. Cost of freight incurred in shipping these plants from the nursery to the store.
5. Cost of advertising in the local newspaper.
6. Cost of brochures prepared and printed by head office, which is allocated to retail outlets based on store revenue in the previous year.
7. Salary of the store manager.
8. Salaries of the managers of each of the merchandise departments.
9. Cost of electricity used to light and air-condition the store. to Cost of fuel consumed by the fleet of trucks used to deliver large customer orders.
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