Family Supermarkets (FS) 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:

Ordering$100 per purchase order

Delivery and receipt of merchandise$80 per delivery

Shelf-stocking$20 per hour

Customer support and assistance$0.20 per item sold

The revenues, cost of goods sold, store support costs, and activity-area usage of the three product lines are:

Under its simple costing system, FS allocated 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 AB(C 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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Baked Milk and Froze Goods Fruit Juice Products Financial data Revenues Cost of goods sold Store support $57,000 $63,000 S52,000 $35,000 $11,400 14,100 $10,500 $38,000 $47,000 Activity-area usage (cost-allocation base) Ordering (purchase orders) Delivery (deliveries) Shelf-stocking (hours) Customer support (items sold 25 36 166 5,500 20,500 30 98 183 13 28 24 7,900