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Each of the Big, Small and Medium cost is categorized by the manager into Red, Yellow, Green and Violet costs. Breakdown of the additional costs under these headings is shown in the table below: Red, Yellow, Green and Violet costs are allocated to different retail formats. These costs are apportioned in the ratio of number of units consumed by each retail format. The number of units consumed by each retail format is given in the table below:
 The BIG and Colourful Company
You are running "BIG and Colourful (BnC)" company that sells books to customers through three retail formats:
a. You can buy books from bookstores,
b. You can buy books from supermarket,
c. You can order books over the Internet (Online).
Your manager has an interesting way of classifying expenses: some of the expenses are classified in terms of size: Big, Small and Medium; and others are classified in terms of the colors, Red, Yellow, Green and Violet. The company has a history of categorizing overall costs into initial costs and additional costs. Additional costs are equal to the sum of Big, Small and Medium expenses. There are two types of margins, contribution (sales minus initial costs) and profit (contribution minus additional costs). Given below is the data about sales and costs of BnC:
Read the following statements:
Statement I. Online store accounted for 50% of the sales at BnC and the ratio of supermarket sales and book store sales is 1:2.
Statement II. Initial Cost is allocated in the ratio of sales. If you want to calculate the profit/loss from the different retail formats, then
Sales for online = 50% of 60000 = 30000
Remaining sales = 60000-30000 = 30000
The ratio of supermarket sales and book store sales is 1:2
Supermarket sales = (30000*1)/3 = 10000
Bookstore sales =Â (30000*2)/3 = 20000
Profit = Sales - Initial costs - Additional costs
Sales and Additional costs can be calculated from the table. But no information about distribution of initial costs among different retails formats. From statement 2 the distribution of initial costs is clear.
Hence both statements will be used to calculate profit for different retail formats.
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