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OPERATIONS
Unicycles Bicycles
Total sales $150M $150M
Occupies 75,000 sq. ft. 25,000 sq. ft.
Advertising $2.5M $2.5M
Total expenses $1.5M $1.5M


Based on the traditional method, advertising and total expenses are divided equally between the two businesses. With 75% of the warehouse space, the unicycle business makes 88% of the total sales for the company. With 25% of the warehouse space, the bicycle business makes 12% of the total sales for the company.

In order to make such a strategic decision the costs have to be accurate and activity-based. One system that aids in this decision is the Activity-based costing system (ABC) (Horngren, Sundem, & Stratton, 2005). This system first accumulates all direct costs into the highly performed activities. Then it allocates those activity-costs groups to believable and dependable cost drivers. Based on financial data this system helps the company make a more strategic decision. I strongly recommend this company invest......

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Approximate Word Count: 375
Approximate Pages: 2 (250 words per double-spaced page)

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