¶ … company major businesses operates. One business manufactures sells unicycles commercial circuses (total sales $150M), sells bicycles public (total sales $20M). The unicycle business occupies 75,000 square feet manufacturing warehouse, bicycle business occupies remaining 25,000 square feet.
Business scenario
Unicycle and bicycle manufacturing
Advertising and warehousing costs
The totality of the advertising and warehousing costs -- M -- were divided equally between the two businesses. Specifically, this means that advertising costs were of 0.5 M. For the unicycle business and 0.5 M. For the bicycle business. Similarly, in a context in which the total warehouse costs were of M, and they were equally divided between the two businesses, it is stated that 0.5 M. were the warehousing costs for the unicycle business and 0.5 M. were the warehousing costs for the bicycle business.
Recommendations for cost allocation
Aside from the traditional manner of dividing the total costs equally and allocating them to the two business activities, there are two other possibilities of allocating the costs -- based on the space occupied in the facility, and based on the level of sales. The warehousing costs would be...
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