Home / Questions / 5-24 ABC, retail product-line profitability. Family Supermarkets (FS) operates at capacity...
5-24 ABC, retail product-line profitability. Family Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows: $100 per purchase order $ 80 per delivery $ 20 per hour S 0.20 per item sold Ordering Delivery and receipt of merchandise Shelf-stocking Customer support and assistance The revenues, cost of goods sold, store support costs, the activities that account for the store support costs, and activity-area usage of the three product lines are as follows: Frozen Products Baked Goods Milk and Fruit Juice Financial data $57,000 $38,000 $11,400 $63,000 $52,000 $35,000 Revenues $47,000 $14,100 Cost of goods sold Store support Activity-area usage (cost-allocation base) Ordering (purchase orders) Delivery (deliveries) Shelf-stocking (hours) Customer support (items sold) $10,500 13 30 25 28 36 98 24 166 183 7,900 20,500 15,500 Under its simple costing system, FS alloc ated support costs to products at the rate of 30% of cost of goods sold. Required 1. Use the simple costing system to prepare a product-line profitability report for FS. 2. Use the ABC system to prepare a product-line profitability report for FS. 3. What new insights does the ABC system in requirement 2 provide to FS managers?
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