Nancy Lake Owns a Small Department Store in a Metropolitan

question 25

Essay

Nancy Lake owns a small department store in a metropolitan area. For twenty years, the accountant has applied overhead to the various departments-Women's Apparel, Men's Apparel, Cosmetics, Housewares, Shoes, and Electronics-based on the basis of employee hours worked. Nancy Lake's daughter, who is an accounting student at a local university, has suggested her mother should consider using activity-based costing (ABC). In an attempt to implement ABC, Nancy Lake and her daughter have identified the following activities.
Instructions
Determine a cost driver for each of the activities listed below.

---

Definitions:

Economic System

The organized way in which a country or a society allocates its resources and apportions goods and services in the national community.

Fundamental Questions

Basic questions that economies face regarding what to produce, how to produce, and for whom to produce, based on limited resources.

Unemployment

The failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force.

Barter System

An economic system where goods or services are directly exchanged for other goods or services without using money.