Family Supermarkets (FS) found that its ABC analysis (see p. 170) provided important insights. FS extends the analysis to cover three more product lines: baked goods, milk and fruit juice, and frozen products. It identifies four activities and activity cost rates for each activity as:

Ordering ...................$120 per purchase order

Delivery and receipt of merchandise ........ $96 per delivery

Shelf-stocking................ $24 per hour

Customer support and assistance .........$0.24 per item sold

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

There are no bottle returns for any of these three product lines.
REQUIRED
1. Use the previous costing system (support costs allocated to products at the rate of 30% of cost of goods sold) to compute a product line profitability report for FS.
2. Use the ABC system (ordering at $120 per purchase order, delivery at $96 per delivery, shelf-stocking at $24 per hour, and customer support at $0.24 per item sold) to compute 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 Goods Milk and Fruit Juice Hrozen Products Financial data Revenues Cost of goods sold Store support $68,400 45,600 13,680 S75,600 56,400 16,920 $62,400 42,000 12,600 Activity area usage (cost driver) Ordering (purchase orders) Delivery (deliveries) Shelf-stocking (hours) Customer support (items sold 30 98 183 15,500 25 36 166 20,500 13 28 24 7,900